Question: 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
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 $15 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 $85 million, and the expected cash inflows would be $35 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $32 million. The risk-adjusted WACC is 12.00%. a. Calculate the NPV without mitigation. b. Calculate the NPV with mitigation. a)$41.17m; b)$15.35m a)$15.35m; b)$26.17m a)$30.35m; b)$41.17m a)$26.17m; b)$15.35m
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