The internal rate of return rule, business and finance homework help
You owna coal mining company and are considering opening a new mine. The mine itselfwill cost $120 million to open. If this money is spent immediately, the minewill generate $20 million for the next 10 years. After that, the coal will runout and the site must be cleaned and maintained at environmental standards. Thecleaning and maintenance are expected to cost $2 million per year inperpetuity. What does the IRR rule say about whether you should accept thisopportunity? If the cost of capital is 8%, what does the NPV rule say?