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QUESTION
Tangshan Mining Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to...
Tangshan Mining Company is considering investing in a new mining project. The firm's cost of
capital is 12 percent and the project is expected to have an initial aftertax
cost of $5,000,000.
Furthermore, the project is expected to provide aftertax
operating cash flows of $2,500,000 in year 1,
$2,300,000 in year 2, $2,200,000 in year 3, and ($1,300,000) in year 4?
(i) (3 pts) Calculate the project's NPV.
(ii) (2 pts) Calculate the project's IRR.
(iii) (3 pts) Should the firm make the investment? Why?
year cash flows01234 -5000000250000023000002200000-1300000 RateNPVIRR 12%$ -194,568.189.11% No, the project should not be accepted