Problem:
A mining company is deciding whether to open a strip mine, which costs $1.5 million. Cash inflows of $13.5 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12.5 million, payable at the end of Year 2.
Required:
Question 1: What is the project's MIRR at WACC = 10%?
Question 2: What is the project's MIRR at WACC = 20%?
Note: Provide support for rationale.