Capital budgeting for environmental projects offers an interesting area for additional study. The Environmental Protection Agency (EPA) has partnered with Tellus Institute (www.tellus.org (Links to an external site.)) to further its ongoing interest in environmental cost management. Much of the information relating to the U.S. EPA environmental accounting project can be found in the archives at the EPA website (www.epa.gov (Links to an external site.)). The EPA environmental accounting project dealt with such topics as environmental cost definitions, decisions using environmental costs, and capital budgeting. Using the EPA and Tellus websites as well as the World Resources Institute (www.wri.org (Links to an external site.)) and other resources that you can locate, answer the following questions.

1. Are NPV and IRR used for environmental project approval? Can you find out what the hurdle rate is for IRR? Do you think this hurdle rate is the cost of capital? If not, then discuss why a different required rate is used.