QUESTION 17 Project Nemo has an upfront cost of $100,000 and will generate cash flows of $30,000 per year for the next 5 years. What is the project's payback period? 2.86 years 3.13 years 3.24 years 3.33 years 3.93 years

QUESTION 18 Consider a plan to build a plant that will cost $200 million and generate cash flows of $65 million per year for the next 5 years. If the WACC is 16%, what is the net present value (NPV) of the plant project? $7.48 million $9.65 million $10.51 million $12.83 million $13.96 million

QUESTION 19 Consider a plan to build a plant that will cost $285 million and generate cash flows of $85 million per year for the next 5 years. If the WACC is 12%, the net present value (NPV) of the plant project would be $21.41 million. However, the plant causes pollution and environmental damages that could be mitigated by spending $56 million upfront. This would cause the plant to generate cash flows each year of $93 million rather than $85 million. If the pollution and environmental damages created by the plant do not exceed legal limits, what can we conclude about the plant project? Although the net present value with mitigation is still positive, the plant operators will choose not to mitigate because the net present value is higher without mitigation. The net present value with mitigation is still positive so the plant will choose to mitigate the damages. The net present value with mitigation would be negative so the plant will not open. Even though the net present value with mitigation will be negative, the plant will open and will choose to mitigate the damages. The net present value with mitigation will be negative but the plant will still open and choose to pollute and damage the environment within the limits of the law.

QUESTION 20 Consider a plan to build a plant that will cost $285 million and generate cash flows of $85 million per year for the next 5 years. If the WACC is 10%, the net present value (NPV) of the plant project would be $37.22 million. However, the plant causes pollution and environmental damages that could be mitigated by spending $56 million upfront. This would cause the plant to generate cash flows each year of $93 million rather than $85 million and result in a net present value (NPV) of $11.54 million. However, the annual public health costs to the community will increase by $8 million per year if the plant is built without mitigation. If those externalities are factored in the NPV of the plant with mitigation becomes $41.87 million. If the pollution and environmental damages created by the plant do not exceed legal limits, what can we conclude about the plant project in a pure capitalist system? The plant will open and choose to mitigate the damages because the NPV is still positive. The plant will open and choose not to mitigate the damages because this leads to the highest NPV for the owners. From an economic and societal point of view, there is a deadweight loss of $4.65 million. Both a. and c. are correct. Both b. and c. are correct