Share
Explore BrainMass

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

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%

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