A mining company is deciding whether to open a strip mine, which costs $2.5 million. Cash inflows of $12.5 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12.5 million, payable at the end of Year 2.
a) What is the project's MIRR at WACC = 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
b) What is the project's MIRR at WACC = 20%? Round your answer to two decimal places. Do not round your intermediate calculations.
A mining company is deciding whether to open a strip mine, which costs $2.5 million. Cash inflows of $12.5 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12.5 million, payable at the end of Year 2.
a) What is the project's MIRR at WACC = 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
b) What is the project's MIRR at WACC = 20%? Round your answer to two decimal places. Do not round your intermediate calculations.
Related questions
Capital budgeting criteria
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 |
| Project B | -$400 | $135 | $135 | $135 | $135 | $135 | $135 | $0 |
a)What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A $
Project B $
b) What is each project's IRR? Round your answer to two decimal places.
Project A
Project B
c) What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Project A
Project B
e) Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.
| Discount Rate | NPV Project A | NPV Project B |
| 0% | $ | $ |
| 5 | $ | $ |
| 10 | $ | $ |
| 12 | $ | $ |
| 15 | $ | $ |
| 18.1 | $ | $ |
| 24.83 | $ | $ |
F) Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
G) What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A
Project B
