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 0 to mitigate the environmental problem, but it would not be required to do so. Developing the mine (without mitigation) would cost $63 million, and the expected net 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 10%. a. Calculate the NPV and IRR with mitigation.

Question

20-08-2019
Business

contestada

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 0 to mitigate the environmental problem, but it would not be required to do so. Developing the mine (without mitigation) would cost $63 million, and the expected net 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 10%. a. Calculate the NPV and IRR with mitigation.

Respuesta :

Otras preguntas

Find the perimeter of the shape below: A.12.4 units B.13.4 units C.15.1 units D.16.8 units

Compare and contrast genetic engineering to the process of natural selection. Select all statements that are true. By selecting the genetic information that is

What can you include in your paper to ensure that you are avoiding unintentional plagiarism? A. Quotation marks around sentences or phrases from outside sou

What is the first step when rewriting y = 6x2 + 18x + 14 in the form y = a(x – h)2 + k? 16 must be factored from 18x + 14 x must be factored from 6x2 + 18x 6 mu

Bailey writes the expression g2 + 14g + 40 to represent the area of a planned school garden in square feet. If g = 5, what are the dimensions of the school gard

Which of the following types of advertising is the most difficult for consumers to ignore?

Let x^2-mx+24 be a quadratic with roots x_1 and x_2. If x_1 and x_2 are integers, how many different values of m are possible?

Based on the passage, which of the following might be a theme of "The Chrysanthemums"? A. Going out for dinner can be fun. B. Friendship should be earned.

The respiratory system contains which of the following structures and organs

sofiasuarez1307 sofiasuarez1307 · Answer 1 · 2019-08-22T19:37:39+02:00

Answer:

With mitigation: NPV =$36,670,000, IRR= 15,24%

Without mitigation: NPV= $ 42,000,000, IRR= 19,86%

Explanation:

To calculate the Net Present Value (NPV) we have to sum the present value of a project´s cash flows (positive and negative cashflows). To do so, we need: the number of periods of the project, the discount rate, cost of captal or WACC, and the future values of the cash flows. Then we apply the formula attached.

To calculate the Internal Rate of Return (IRR) we have to find the discount rate, cost of capital or WACC that makes the NPV equal to cero. That means we have to find a rate in which the investor do not create or destroy value, only recovers the investment. I attached the formula.

But, this is better if we use excel:

First we copy the cash flows of the two projects. To find the NPV we use the financial formula "NPV" in this way:

"=NPV(rate;cash flows from year 1 to year 5)+ cash flow of year 0"

To find the IRR we use the financial formula "IRR" in this way:

"=IRR(cash flows from year 0 to year 5)"

I attached the excel figure.