The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, "This is a golden opportunity." The mine will cost $3,400,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $575,000 at the end of the first year, and the cash inflows are projected to grow at 8 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $123,000 at the end of year 11. Required:
What is the IRR for the gold mine? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e. g., 32.16))
IRR
%

19.07%

Explanation:

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested

IRR can be calculated with a financial calculator  

Cash flow in year 0 = $-3,400,000

Cash flow in year 1 = $575,000  

Cash flow in year 2 = $575,000 x 1.08  

Cash flow in year 3 =  $575,000 x 1.08^2

Cash flow in year 4 =  $575,000 x 1.08^3

Cash flow in year 5 =  $575,000 x 1.08^4

Cash flow in year 6 =  $575,000 x 1.08^5

Cash flow in year 7 =  $575,000 x 1.08^6

Cash flow in year 8 =  $575,000 x 1.08^7

Cash flow in year 9 =  $575,000 x 1.08^8

Cash flow in year 10 =  $575,000 x 1.08^9

Cash flow in year 11 =  ($575,000 x 1.08^10) - $123,000

IRR = 19.07%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

answer; the correct answer to the above statement is (true);

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.