Calculating IRR The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $900,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $175,000 at the end of the first year, and the cash inflows are projected to grow at 8 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $125,000 at the end of year 11.
a.What is the IRR for the gold mine?
b.The Utah Mining Corporation requires a 10 percent return on such undertakings. Should the mine be opened?
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