Problem:
Tangshan Mining Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to have an initial after tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3, and ($1,300,000) in year 4.
Required:
Question 1: Calculate the project's NPV?
Question 2: Calculate the project's IRR?
Question 3: Should the firm make the investment.
Note: Solve the problem and show all work.