Find what is the present value of the receipts

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Question (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 Rs.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 Rs.60 million, and the expected cash inflows would be Rs.20 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be Rs.21 million. The risk-adjusted WACC is 12%. You are required to evaluate the proposal with mitigation using NPV.

Question (b) Lara is going to receive $10,000 a year at the end of each of the next five years from her insurer to meet her education cost. Using a discount rate of 14%, What is the present value of the receipts?

Reference no: EM132558964

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