You are asked to assess a project for Molycorp a mining company. They have the f
ID: 2619901 • Letter: Y
Question
You are asked to assess a project for Molycorp a mining company. They have the following cash flows: Year 0: -200,000 Year 1: 156,000 Year 2: 179,000 Year 3: -34,000 Year 4: 127,000 Which of the following is a true statement regarding the analysis of this project? A. You can use IRR or NPV and since there is only one project, the assessment will yield a valid answer. B. You can use MIRR or NPV but not IRR since there are more than one sign changes in the cash flows. C. You can use NPV but not MIRR or IRR since there are more than one sign changes in the cash flows. D. In a situation like this, the payback period is the preferred method to use.
Explanation / Answer
Option A: You can use IRR or NPV and since there is only one project, the assessment will yield a valid answer.
Beacuse if the NPV is positive or if the IRR is more than the cost of capital then the project can be accepted
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