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Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting 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 $10.33 million at Year to mitigate the environmental Problem, but it would not be required to do so. Developing the mine (without mitigation) would require an initial outlay of $63 million, and the expected cash inflows would be $21 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $22 million. The risk adjusted WACC is 11% a. Calculate the NPV and TRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round Intermediate calculations. Round your answers to two decimal places MPV: million TRR: Calculate the NPV and IRR without mitigation. Enter your answer for Ney In millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places NPV: 1 million TRR b. How should the environmental effects be dealt with when this project is evaluated 1 The environmental effects if not mitigated could result in additional loss of cash flows and/or fines and penalties due to it will among customer community, etc. Therefore, even though the mine is legal without mitigation, the company needs to make sure that they have anticipated all costs In the "ne mitigation analysis from not doing the environmental mitigation II. The environmental effects should be ignored since the mine is legal without mitigation 11. The vironmental effects should be treated an cost and therefore lonored IV. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the mee is legat without mitigation, there are no benefits to performing ano mitation analysis V. The environmental facts should be treated a remote posibility and should only be concidered at the time in which they actually Shmold this project be undertaken

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