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Dvinal [7]
3 years ago
9

6. You own a coal mining company and are considering opening a new mine. The mine will cost $120.0 million to open. If this mone

y is spent immediately, the mine will generate $20.0 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $2.0 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity
Business
1 answer:
VladimirAG [237]3 years ago
6 0

Answer:

What does the IRR rule say about whether you should accept this opportunity?

The IRR rule basically states that if the project's internal rate of return (IRR) is higher than the cost of capital (discount rate or WACC), then the project should be accepted. In this case, we are not given the company's WACC or any discount rate we can use, therefore there is nothing to compare the project's IRR against.

Based on prior experience, this project's IRR will not be very high and if we consider the cost of keeping the site clean forever, I really doubt that the project is profitable. If you calculate the project's IRR without including the perpetual cleaning cost, IRR = 11%.

If we assume any of the 3 WACCs I used as an example below, the project's IRR including cleaning costs:

  • if WACC = 12%, then IRR = 9.26% REJECTED
  • if WACC = 10%, then IRR = 8.98% REJECTED
  • if WACC = 9%, then IRR = 8.79% REJECTED
  • if WACC = 8%, then IRR = 8.54% ACCEPTED

In order for this project to be profitable, the WACC would need to be very low (around 8% or less).

Explanation:

cost of opening a new mine $120 million

annual cash flow $20 million

expected cleaning costs $2 per year in perpetuity

the cost of keeping the site clean forever = $2 million / discount rate or WACC:

  • if WACC = 12%, then perpetual cost = $16.67 million
  • if WACC = 10%, then perpetual cost = $20 million
  • if WACC = 9%, then perpetual cost = $22.22 million
  • if WACC = 8%, then perpetual cost = $25 million

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prisoha [69]

Now you have to get to work. Your first thought is to have seven members on the team, but management research indicates that seven members would be . It would be better to have people on the team.

In general, it's best to include members of only a single culture when forming virtual teams, since electronic communication is already fraught with misunderstandings.

<h3>What is electronic communication?</h3>

For more than a century, the market for communication electronics radio equipment has been expanding quickly. One of the factors contributing to the rapid expansion in the USA is homeland security. The field of electronics has grown phenomenally since the 1950s, when the "solid state" transistor was created, and the 1960s, when transistor-transistor logic and the IC (integrated circuit) were developed. This is currently evident in the "radio communications" industry. Sending traditional LMR (land-mobile radio) signals over the Internet (Internet Protocol) is the newest craze. This is known as RoIP (Radio over Internet Protocol), which is similar to VoIP (Voice over Internet Protocol) but uses radio instead of voice.

To learn more about electronic communication from the given link:

brainly.com/question/24043670

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7 0
2 years ago
The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team mem
IrinaVladis [17]

Answer:

C. increased diversification of Sierra Infusion.

Explanation:

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the Board of Directors with a proposal for increased diversification of Sierra Infusion.

4 0
3 years ago
The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month perio
Eduardwww [97]

Answer:

$33,000

Explanation:

The calculation of the fixed cost and the variable cost per machine hour by using high low method is shown below:

Variable cost per hour = (High manufacturing overhead cost - low manufacturing overhead cost) ÷ (High machine hours - low machine hours)

= ($198,000 - $153,000) ÷ (110,000 hours - 80,000 hours)

= $45,000 ÷ 30,000 hours

= $1.5

Now the fixed cost is

= High manufacturing overhead cost - (High machine hours × Variable cost per hour)

= $198,000 - (110,000 hours × $1.5)

= $198,000 - $165,000

= $33,000

6 0
3 years ago
Surreal Corp. has borrowed to invest in a project. The loan calls for a payment of $17,500 every month for three years. The lend
Marianna [84]

Answer:

The rate at which to discount the payments to find sum borrowed is 12.68%

Explanation:

The discount rate to be used in computing the sum borrowed can e derived from the effective annual rate formula below:

Effective annual rate = (1 + Quoted interest rate/m)^m - 1

quoted interest rate is 8.40

m is the number of months in a year when compounding is done which is 12

effective annual rate=(1+8.40%/12)^12-1

effective annual rate=(1+0.01)^12-1

effective annual rate=(1.01)^12-1

effective annual rate=1.12682503 -1

effective annual rate=0.12682503=12.68%

7 0
3 years ago
Discuss the intellectual debates by contemporary scholars surrounding issues of development​
r-ruslan [8.4K]

Answer:

Intellectual scholar discuss the issues of development​ as something arising out of differences between the nature and nurturing given to an individual. They also talk about relative importance of early experiences versus experiences occurring at a  later stage  in life.

They also talk about sequential development stages with age that cause emergence of certain skills in all individuals. They also talk about various theories such as cognitive theory, developmental theory, Psychoanalytic Theories, Abnormal Behavior vs. Differences etc.

Explanation:

Intellectual scholar discuss the issues of development​ as something arising out of differences between the nature and nurturing given to an individual. They also talk about relative importance of early experiences versus experiences occurring at a  later stage  in life.

They also talk about sequential development stages with age that cause emergence of certain skills in all individuals. They also talk about various theories such as cognitive theory, developmental theory, Psychoanalytic Theories, Abnormal Behavior vs. Differences etc.

4 0
2 years ago
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