A mining company plans to mine a beach for zirconium sands. Doing so will cost $10 million up front and then produce cash flows of $3 million per year for five years. At the end of the sixth year the company will incur shut-down and clean-up costs of $2 million. If the cost of capital is 11%, then what is the MIRR for this project?

Question

Quizplus · Accepted Answer

The Modified Internal Rate of Return (MIRR) considers the cost of capital and the reinvestment of cash flows. By calculating the MIRR using the given cash flows, costs, and cost of capital, the MIRR is found to be approximately 11.03%.

A Mining Company Plans to Mine a Beach for Zirconium