A mining company is considering a new project. Because the mine has received a permit, the project would belegal; but it would cause significant harm to a nearby river. The firm could spend an additional $10 million atYear o 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 $60 million, and the expected cash inflows would be $20million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $21 million. Therisk-adjusted WACC is 12%.a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answerof $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answersto two decimal places.NPV: $millionIRR:Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, ananswer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round youranswers to two decimal places.NPV: $millionIRR:%

Net present value (NPV) of an alternative/project refers to the variance between the initial…

a. 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:

a. 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:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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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 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 $60 million, and the expected 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 15%. 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…
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 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 $60 million, and the expected 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 15%. How should the environmental effects be dealt with when this project is evaluated? 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…
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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 $9.66 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 $57 million, and the expected cash inflows would be $19 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $20 million. The risk-adjusted WACC is 11%. a. 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…
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 $9.66 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 $57 million, and the expected cash inflows would be $19 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $20 million. The risk-adjusted WACC is 12%. 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 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…
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 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 million, and the expected 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 10%. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.NPV $ millionIRR % Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an…
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 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 $51 million, and the expected cash inflows would be $17 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $18 million. The risk-adjusted WACC is 11% a. 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: $ millionIRR: % 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.…
A mining company isconsidering a new project. Because the mine has received a permit, the project wouldbe legal, but it would cause significant harm to a nearby river. The firm could spend anadditional $10 million at Year 0 to mitigate the environmental problem, but it would notbe required to do so. Developing the mine (without mitigation) would cost $60 million,and the expected cash inflows would be $20 million per year for 5 years. If the firm doesinvest in mitigation, the annual inflows would be $21 million. The risk-adjusted WACCis 12%.a. Calculate 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 mitigation?