Plot the project’s npv profile

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Reference no: EM131101170

The Ulmer Uranium Company is deciding whether or not it should open a strip mine, the net cost of which 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. Plot the project’s NPV profile.

b. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning.

c. Can you think of some other capital budgeting situations where negative cash flows during or at the end of the project’s life might lead t multiple IRRs?

d. What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept/reject decision as the NPV method?

Reference no: EM131101170

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