Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 12, Problem 19P
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net
- 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 in which negative cash flows during or at the end of the project’s life might lead to 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?
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The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost 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. Select the correct graph for the project's NPV profile.
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b. Should the project be accepted if r = 6%? Explain your reasoning.
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Should the project be accepted if r = 11%? Explain your reasoning.
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c. What is the project's MIRR at r = 6%? Do not round intermediate calculations. Round your answer to two decimal places.
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A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $1.5 million. Cash inflows of $13.5 million would occur at the end of Year 1. The land
must be returned to its natural state so there is a cash outflow of $11.5 million, payable at the end of Year 2.
a. Select the project's NPV profile.
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b. Should the project be accepted if WACC = 10%?
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Should the project be accepted if WACC = 20%?
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c. What is the project's MIRR at WACC = 10%? Do not round intermediate calculations. Round your answer to two decimal places.
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What is the project's MIRR at WACC = 20%? Do not round intermediate calculations. Round your answer to two decimal places.
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Does MIRR lead to the same accept/reject decision for this project as the NPV…
The company XYZ is deciding whether or not to on a new project with an initial cost of 5.5 MM$. Net cash inflows are expected to be 9 MM$ for each of the first five years of operations. In the sixth year, the abandonment cost of the project is 35 MM$. a. Develop and plot the NPV profile for the projectb. Should the project be accepted at a rate of return of 8%? Should it be accepted at a rate of return of 15%? c. What is the project GRR if the available reinvestment rate is 8%? What if the rate is 15%?
Chapter 12 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3QCh. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6P
Ch. 12 - Your division is considering two investment...Ch. 12 - Edelman Engineering is considering including two...Ch. 12 - Prob. 9PCh. 12 - Project S has a cost of $10,000 and is expected to...Ch. 12 - Prob. 11PCh. 12 - After discovering a new gold vein in the Colorado...Ch. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - The Pinkerton Publishing Company is considering...Ch. 12 - Shao Airlines is considering the purchase of two...Ch. 12 - The Perez Company has the opportunity to invest in...Ch. 12 - Filkins Fabric Company is considering the...Ch. 12 - The Ulmer Uranium Company is deciding whether or...Ch. 12 - The Aubey Coffee Company is evaluating the...Ch. 12 - Your division is considering two investment...Ch. 12 - The Scampini Supplies Company recently purchased a...Ch. 12 - You have just graduated from the MBA program of a...Ch. 12 - Prob. 2MCCh. 12 - Define the term “net present value (NPV).” What is...Ch. 12 - Prob. 4MCCh. 12 - Prob. 5MCCh. 12 - What is the underlying cause of ranking conflicts...Ch. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - In an unrelated analysis, you have the opportunity...Ch. 12 - Prob. 12MC
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Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License