Strip Mining, Inc. has a required rate of return of 16% on new investments. It can develop a new mine at an initial cost of $5 million. The mine would provide a cash flow of $30 million in 1 year. The land then must be reclaimed at a cost of $28 million in the second year.
d) What will be the MIRR of the mine if we send all the future cash flows to the end of the timeline?
e) What will be the MIRR of the mine if we send all the negative cash flows to the present and incorporate them into the initial cash outflow and we send all the positive cash flows to the end of the timeline?
f) Would you accept this project based on those MIRR computations?