A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but i

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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 $10.33 million at Year 0 to mitigate the environmental
Problem, but it would not be required to do so. Developing the mine
(without mitigation) would require an initial outlay of $63
million, and the expected cash inflows would be $21 million per
year for 5 years. If the firm does invest in mitigation, the annual
inflows would be $22 million. The risk-adjusted WACC is 14%.
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
IRR: %
Calculate the NPV and IRR without 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
IRR: %
How should the environmental effects be dealt with when this
project is evaluated?
-Select-IIIIIIIVVItem 5
Should this project be undertaken?
-Select-The project should not be undertaken under the "no
mitigation" assumption.The project should be undertaken only under
the "no mitigation" assumption.The project should not be undertaken
under the "mitigation" assumption.Even when mitigation is
considered the project has a positive NPV, so it should be
undertaken.Even when mitigation is considered the project has a
positive IRR, so it should be undertaken.Item 6
If so, should the firm do the mitigation?
-Select-IIIIIIIVV