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    Seattle Corp's NPV for investment, IRR for new goldmine

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    1. The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment?

    a. $135,984
    b. $ 18,023
    c. $219,045
    d. $ 51,136
    e. $ 92,146

    2. Your company is planning to open a new gold mine. The mine will cost $3.0 million to build, with the expenditure occurring at the end of 2001, and it will bring year-end after-tax cash inflows of $2.0 million at the end of 2002 and 2003, and it will cost $0.5 million to close down at the end of 2004. What is this project's IRR?

    a. Between 14 and 15%
    b. Between 10 and 11%
    c. Between 16 and 18%
    d. Between 12 and 13%
    e. Between 8 and 9%

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    Solution Preview

    1. The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the NPV and IRR for this investment.

    $2.19

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