Question

Problem 10-19
Multiple Rates of Return

The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2.

A. Should the project be accepted if r = 9%?
B. Should the project be accepted if r = 12%?

C. What is the project's MIRR at r = 9%? Do not round intermediate calculations. Round your answer to two decimal places.
%

D. What is the project's MIRR at r = 12%? Do not round intermediate calculations. Round your answer to two decimal places.
%

E. Calculate the two NPVs. Do not round intermediate calculations. Round your answers to the nearest cent.

1    $

2    $

F. Does the MIRR method lead to the same accept-reject decision as the NPV method?

Answer 1