Question: a and b please A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but
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 $18 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 $88 million, and the expected cash inflows would be $38 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $35 million. The risk-adjusted WACC is 12.60%. a. Calculate the NPV without mitigation. b. Calculate the NPV with mitigation. a) $18.31m; b) $28.97m a)\$46.97m; b)\$18.31m a) $36.31m; b) $46.97m a) $28.97m; b) $18.31m
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