15. Problem 11.08 (Capital Budgeting Celterta: Ethical Considerations) A-Z eBook A mining company is considering a new project. Because the mind has received a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an additional $9.33 million a year to mitigate the environmental Problem, but it would not be recuired to do so. Developing the mine (without mitigation) would require an initial outlay of $54 million, and the expected cash flows would be $18 million per year fors years. If the firm does invest in mitigation, the annual inflows would be $19 milion. The risk-adjusted WACC IS 12% a. Calculate the NV and IRR with mitigation Enter your hower for NPV in milions. For example, an answer of $10,550,000 should be entered 10.55. Do not found intermediate calculations. Round your answers to two decimal place. NPV: $ million TRR: Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, answer of $10.550,000 should be entered * 10.55. Do not round bermediate actions. Round your answers to two dedmal places NPV: million IRR h. How should the environmental effects be dealt with when the project is evaluated? 1. The environmental effects if not mitigated could result in additional loss of cash flows and/or fines and penalties due to wel among customers, community, etc. Therefore, even though the mine is al without mitigation, the company Deeds to make sure that they have anticipated all costs in the no mitigation walysis from not doing the environmental mitigation 11. The environmental effects should be ignored since the minister without mitigation II. The environmental effects should be treated a un cost and therefore ignored I. The environmental effect it notated would result in additional cash flow. Therefore, since the mine is legal without mitipation there are no benefits to performing ano mitigation analysis The environmental effects should be treated as a remote plity and should only be considered at the time in which they actually OGU > MacBook Pro 80 4 4) A # 3 $ 4 % 5 & 7 *N 6 8 9 0 E R Y U 0 D F F G H . V B N M H alt option 6 c Should this project be undertaken? If so, should the firm do the mitigation? 1. Under the assumption that will costs have been considered, the company would not mitigate for the environmental Impact of the project since its IRR without mitigation is greater than its IRR when mitigation costs are included in the analysis 11. Under the assumption that all costs have been considered, the company would mitigate for the environmental impact of the project since its NPV with mitigation is greater than its NPV when mitigation costs are not included in the analysis m. Under the assumption that all costs have been considered, the company would not mitigate for the environmental impact of the project Since its NPU without mitigation is greater than its NPV when mitigation costs are included in the analyses IV. Under the assumption that will costs have been considered, the company would mitigate for the environmental impact of the project since its RR with mitigation is greater than its IRR who mitigation costs are not included in the analysis Under the assumption that all costs have been considered the company would not be for the environmental impact of the project Since its NPV with mitigation is greater than its NPV when mitigation costs are not included in the analysis Grade It Now Save & Continue Continue without saving 1 MacBook Pro A % 5 & 7 * 8 1 0 . 6 9 R T Y U o H J L > -7 V B N M ol # command option
