1.    You are looking at an investment that pays you $500 every four months for 10 years. An investment of this risk requires a discount rate of 10%, compounded monthly. If the investment is fairly priced, what price should you pay?
2.    (10 pts) A mining company plans to mine a beach for rutile. To do so will cost $14 million up front and then produce cash flows of $7 million per year for five years. At the end of the sixth year the company will incur shut-down and clean-up costs of $6 million. 
a. If the cost of capital is 13.0%, calculate the IRR.
b. If the cost of capital is 13.0%, calculate the MIRR for the project.
c. Why do you find different answers for the IRR and the MIRR?

 

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