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Please show all work associated to question CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS A mining company is considering a new project. Because the mine has received
Please show all work associated to question
CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS 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 ham to a nearby river. The firm could spend an additional $10 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 $60 milion, and the expected net cash inflows would be $20 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $21 million. The risk-adjusted WACC is 12%. a. Cakulate the NPV and IRR with and without mitigation b. How should the environmental effects be dealt with when this project is evaluated? c. Should this project be undertaken? If so, should the firm do the mitigationStep by Step Solution
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