please answer quicky, due soon
A mining company is considering a hew project. Beca ute the mine has recelved a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an odditional 39 million at Year 0 to mitigate the environimental Problem, but it would not be required to do so. Developing the mine (without mikigation) would require an initial outlay of $51 million, and the expected cash inflows would be $17 milion per year for 5 years. If the firm does invest in mitigation, the annus inflows would be 518m illion. Tha fisk-adjusted WacC is 15 five. 3. Calcultete the NPV and TRR with mitigation. Enter your answer for NPV in millions. For exomple, an answer of 310,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. NPWi 5 million TQR: * theted at 10.55. Do not round intermediate calculations. Round your answers to two decimal places. b. How should the environmental effects be dealt with when this project is evaluated? 1. The environmental effects if not mitigated could result in additional loss of cash flows and/or fines and penaities due to ill will among custamers, community, etc. Therefore, even though the mine is legal without mitigation, the company needs to make sure that they have anticipated all costs in the "no mitigation" analysis from not doing the environmental mitigation. 11. The environmental effects should be ignored since the mine is legal without migigstion. Iti. The enviranmentel effects should be treated as a sunk cost and therefore ignored, b. How should the environmental effects be deait with when this project is evaluated? 1. The environmental effects if not mitigated could result in additional loss of cash flows and/or fines and penaities due to ilit will among customers, community, etc. Therefore, even though the mine is legol without mitigation, the company needs to make sure that they have anticipated all costs in the "no mitigation" analysis from not doing the environmental mitigotion. II. The environmental effects should be ignored since the mine is legal without mitigation. IIt. The envirenmental effects should be treated as a sunk cost and therefore ignored. IV. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the mire is legal without mitigation, there bre no benefits to performing o "no mitigation" analysis. V. The envirenmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur, c. Shouid this profect be undertaken? If 50 , should the firm do the mitigation? 1. Under the assumption that all costs have been considered, the company would not mitigate for the environmentai impact of the project since its IRR without mitigation is greater than its IRR when mitigation costs are included in the analysis. It. Under the assumption that all costs have been considered, the company would mitigate for the environmental impact of the praject since its NPV with mitigation is greater than its NPV when mitigation costs are not included in the analysis. IIt. 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 mitigation costs are included in the analysis: IV. Under the assumption that all costs have been considered, the company would mitigate for the environmental impact of the project since its tRR with mitigotion is greater than its IRR when mitigation costs are not included in the snalysis. 1: End-of-Chapter Problems-The Basics of Capital Budgeting 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 not mitigate for the environmental impoct of the project since its IRR without mitigation is greater than its IRR when mitigation costs are included in the onalysis. 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 mitigation is greater than its NPV when mitigation costs are not included 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 mitigation costs are included in the analysis. IV. Under the assumption thot all costs have been considered, the company would mitigate for the environmental impact of the project since its IRR with mitigation 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 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
