21) 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. What is the
project's NPV? Should the firm make the investment?
22) Consider the following project X. The cost of capital is 10%. Project X costs $600 and has
cash flows of $400 in each of the next 2 years. What is the project's IRR? Should the firm accept
the project X?
23) Ehrmann Data Systems is considering a project that has the following cash flow and
WACC=10%. What is the project's MIRR? Should the project be accepted or not?
Year
0
1
2
3
Cash flows
-$1,000
$450
$450
$450