A mining company is considering a new project Because the mine 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 million at Year 0 to mitigate the environmental Problem, but it would not be required to do so Developing the mine (without mitigation) would cost $51 million, and the expected cash inflows would be $17 million per year for 5 years If the firm does invest in mitigation, the annual inflows would be $18 million The risk adjusted WACC is 14 Calculate the NPV and IRR with mitigation Round your answers to two decimal places Do not round your intermediate calculations Enter your answer for NPV in millions For example, an answer of $10,550,000 should be entered as 10 55 NPV $million IRR Calculate the NPV and IRR without mitigation Round your answers to two decimal places Do not round your intermediate calculations Enter your answer for NPV in millions For example, an answer of $10,550,000 should be entered as 10 55 NPV $million IRR

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 24, 2024

A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant

A mining company is considering a new project. Because the mine 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 million at Year 0 to mitigate the environmental Problem, but it would not be required to do so. Developing the mine (without mitigation) would cost $51 million, and the expected cash inflows would be $17 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $18 million. The risk-adjusted WACC is 14%.

Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.

NPV $million

IRR%

Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.

NPV $million

IRR%