You own a coal mining company and are considering opening a new mine. The mine will cost $115.9 million to open. If this money is spent immediately, the mine will generate $20.1 million for the next 10 years. After that, the coal will run ou the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.8 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? Ift cost of capital is 8.2%, what does the NPV rule say? NPV of the Investment in the Coal Mine 12- Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A. Reject the opportunity because the IRR is lower than the 8.2% cost of capital. B. There are two IRRS, so you cannot use the IRR as a criterion for accepting the opportunity. O C. Accept the opportunity because the IRR is greater than the cost of capital. O D. The IRR is r= 10.17%, so accept the opportunity. The NPV using the cost of capital of 8.2% is $million. (Round to three decimal places.) NPV ($ millions)

You own a coal mining company and are considering opening a new mine. The mine will cost $115.9 million to open. If this money is spent immediately, the mine will generate $20.1 million for the next 10 years. After that, the coal will run ou the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.8 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? Ift cost of capital is 8.2%, what does the NPV rule say? NPV of the Investment in the Coal Mine 12- Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A. Reject the opportunity because the IRR is lower than the 8.2% cost of capital. B. There are two IRRS, so you cannot use the IRR as a criterion for accepting the opportunity. O C. Accept the opportunity because the IRR is greater than the cost of capital. O D. The IRR is r= 10.17%, so accept the opportunity. The NPV using the cost of capital of 8.2% is $million. (Round to three decimal places.) NPV ($ millions)

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Description: The NPV using the cost of capital of8.2%is You own a coal mining company and are considering opening a new mine. The mine will cost $115.9 million to open. If this money is spent immediately, the mine will generate $20.1 million for the next 10 years

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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