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 $2,700,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $375,000 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 $430,000 at the end of Year 11. a. What is the IRR for the gold mine? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Business

Raina Lowe

8 August, 00:48

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 $2,700,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $375,000 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 $430,000 at the end of Year 11. a. What is the IRR for the gold mine? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Niko Farley · Answer 1

The IRR for the gold mine is 14.00%

Explanation:

Year Cash flows

0 ($2,700,000.00)

1 375000

2 405000

3 437400

4 472392

5 510183.36

6 550998.0288

7 595077.8711

8 642684.1008

9 694098.8289

10 749626.7352

11 379596.874

IRR 14.00%

Therefore, The IRR for the gold mine is 14.00%