16.

a.)

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 $10.66 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 $66 million, and the expected cash inflows would be $22 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $23 million. The risk-adjusted WACC is 15%.

1. 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: %

2. ) Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11%.

   	0		1		2		3		4
   Project A	-1,300		800		375		295		305
   Project B	-1,300		400		310		445		755

   What is Project As IRR? Do not round intermediate calculations. Round your answer to two decimal places.