Question $8(1$ point$)$

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 $12\mathrm{.}00\%.$

a$.$ Calculate the NPV without mitigation.

b$.$ Calculate the NPV with mitigation.

a$)$ $$41\mathrm{.}17m$; b$)$ $$15\mathrm{.}35m$

a$)$ $$30\mathrm{.}35m$; b$)$ $$41\mathrm{.}17m$

a$)$ $$26\mathrm{.}17m$; b$)$ $$15\mathrm{.}35m$

a$)$ $$15\mathrm{.}35m$; b$)$ $$26\mathrm{.}17m$