A mining company is considering a new project because the

Reference no: EM13363708

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 net cash inflows would be $20 million per year for 5 years. If the firm does invest in mitigation, the annual cash inflows would be $21 million. The firm's cost of capital is 12%.

a. Determine 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?

Reference no: EM13363708

Questions Cloud

Tarek framborgia is considering the purchase of a : tarek framborgia is considering the purchase of a disability policy. he is currently 35 years old and earns 50000 per

Step into the shoes of a financial analyst discuss which : step into the shoes of a financial analyst. discuss which steps of the capital budgeting process you would find the

Mmk cos normally pays an annual dividend the last such : mmk cos. normally pays an annual dividend. the last such dividend paid was 1.7 all future dividends are expect to grow

Lil john industries equity is currently selling for 46 per : lil john industries equity is currently selling for 46 per share and there are 2.1 million shares outstanding. the firm

A mining company is considering a new project because the : a mining company is considering a new project. because the mine has received a permit the project would be legal but it

Ivans inc paid 484 in dividends and 587 in interest this : ivans inc. paid 484 in dividends and 587 in interest this past year. common stock increased by 197 and retained

As the cfo of a company what indicators would you look at : as the cfo of a company what indicators would you look at to assess whether your firms long-term assets were impaired?

What approaches would you use to estimate the value of : what approaches would you use to estimate the value of brands? what assumptions underlie these approaches? as a

If you insulate your office for 22000 you will save 2200 a : if you insulate your office for 22000 you will save 2200 a year in heating expenses. these savings will last forever.a.

User Account

All Pages