A mining cempany is considerng a new project. Secsuse the mine has received s permit, the project woyld be legsl; but it would cause significant harm to a nerbry river. The firm could spend an odditional s10 milion at year 0 te mitisose the environthental Problem, but in would not be required to do so. Develoging the mine (without mitgation) would require The risk-adjusted WACC in 10% a. Calculate the NPV and IRR with mitigation, Enter your answer for KeV in milions. Fon example, an anwace of sto, 550,000 shevid ba kmtered as 10,55 , Do not round intermediate calcututsins. Pound your answers to two decimal piaces. NPV: $ milion 12R: intermediate caiculations. Round your answors to two decimal places: NPV:s milion HRR: b. How should the environmental effects be dealt with when this project is evalvated? 1. The environmental effects if not mitipated could rosui in adesienal loss of cash flews andier fines and penalties fue to it wiil among oultomers, community, ete. Therefore, even though the mine is ifgal without mitipation, the compary neteds to make aure that ther have anticipoted all coss in the "no mitigatice" anainsis fram not doing the environmental migation. If. The environmental effects should be ignered since the mine is legal without mitigetion. 1If. The environrsental effects should be treated as a sunk cost and therefore ignored. IV. The environmental effects if not mitlgated would result in additional cash Bows. Therefore, since the mine is legal without mutiostion, there are no benefits to performing a "no mitigation' analysli. V. The environmental effects should be treated as a remote possibitity and should orily be convidered at the time in which they actually eccun c. Should this project be undertaken? If so; should the firm do the mitigation? 1. Under the assumption that all costs have been considered, the company would noc mitigate for the ervironmental impact of the project since its IRR without mitigation is greater than its IfR when mitigation costs are included in the analysit. 11. Under the assumption that all costs have been considered, the company would mitigate for the environmental impact of the project since its NipV with mitigatia is greater than its NPV when miligation costs are not included in the analysis. If so, should the firm do the mitigation? 1. Under the assumption that all costs have been considered, the company would not mitigate for the environmental inpact of the project since its 18x without. mitigation is greater than its IRR when mitigation costs are included in the analysis. II. Under the assumption that all costs have been considered, the company would mitigate for the environmental impact of the project since its NpV with mitigaticn is greater than its NPV when mitigation costs are not induded in the analysis. III. Under the assumption that all costs have been considered, the company would not mitigate for the environmental impact of the project since its NPV without mitigation is greater than its NpV when miligation costs are included in the analysis. IV. Under the assumption that al costs have been considered, the company would mitigate for the environmental impact of the prolect since its inR with mittgation is greater than its IRR when mitigation costs are not included in the analysis. V. Under the assumption that all costs have been considered, the company would not mitigote for the environmental impoct of the project since its Nov with mitigation is greater than its NPV when mitigation costs are not included in the analysis
