A proposed strip-mine would require the investment of $1 million at the beginning of the first year and a further investment of $1.5 million at the end of the first year. Mining operations are expected to yield annual profits of $500,000 beginning in Year 2. The ore body will sustain 10 years of mining operations. At the end of the last year of operations, the mining company would also have to spend $500,000 on environmental restoration. Cost of capital is 15%. Determine the IRR on the strip-mine proposal.

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The Answer of A proposed strip-mine would require the investment of $1 million at the beginning of the first year and a further investment of $1.5 million at the end of the first year. Mining operations are expected to yield annual profits of $500,000 beginning in Year 2. The ore body will sustain 10 years of mining operations. At the end of the last year of operations, the mining company would also have to spend $500,000 on environmental restoration. Cost of capital is 15%. Determine the IRR on the strip-mine proposal.

A Proposed Strip-Mine Would Require the Investment of $1 Million