Problemafter discovering a new gold vein in the colorado, Ask an Expert

Accounting

Problem:

After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to mine the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. Before proceeding with the extraction, CTC must spend $900,000 for new mining equipment and pay $165,000 for its installation. The gold mined will net the firm an estimated $350,000 each year over the 5-year life of the vein. CTC's cost of capital is 17%. For the purposes of this problem, assume that the cash inflows occur at the end of the year.

Required:

Question 1: What is the project's NPV?

Question 2: What is the project's IRR?

Note: Provide support for your underlying principle.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168853

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