Questions Problem 11.08 (Capital Budgeting Criteria: Ethical Considerations) Questions of 6 Check My Work (2 remaining) 5. eBook 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 $9.33 million at Year to mitigate the environmental Problem, but it would not be required to do so. Developing the mine (without mitigation) would require an irital outlay of $54 million, and the expected cash inflows would be $18 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $19 million. The risk-adjusted WACC is 10%. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round Intermediate calculations. Round your answers to two decimal places NPV: $ million TRR: Calculate the NPV and TRR without mitigation Enter your answer for NPV in milions. For example, an answer of $10,550,000 should be entered as 10.55. DO not round Intermediate calculations. Round your answers to two decimal places NPV: $ 03 milion IRR 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 penalties due to ill will among customers, 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. II. The environmental effects should be ignored since the mine is legal without mitigation III. The environmental effects should be treated as a sunk cost and therefore ignored. IV. The environmental effects if not mitigated would result in addtional cash flows. Therefore, since the mine is legal without mitigation, there are no benefits to performing a "no mitigation" analysis. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur c. Should this project be undertaken? considered the project has a positive NPV, so it should be undertaken