1 answer

17.A mining company is considering a new project. Because the mine has received a permit, the...

Question:

17.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 $10.66 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 $66 million, and the expected cash inflows would be $22 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $23 million. The risk-adjusted WACC is 11%.

a.Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.

NPV $  million
IRR

b.Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.

NPV $  million
IRR


Answers

a.

NPV with mitigation is $ 8.35 Million

IRR is 15.24 %

b.

NPV without mitigation is $ 15.31 Million

IRR is 19.86 %

Explanation:

Computation of NPV for both Projects:

Project with mitigation

Project without mitigation

Year

Computation of PV Factor

PV Factor

@ 11 % (F)

Cash Flow Cm

PV (= F x Cm)

Cash Flow, C

PV (= F x C)

0

1/(1+0.11)^0

1

($76,660,000)

($76,660,000)

($66,000,000)

($66,000,000)

1

1/(1+0.11)^1

0.90090090090

$23,000,000

$20,720,721

$22,000,000

$19,819,820

2

1/(1+0.11)^2

0.81162243324

$23,000,000

$18,667,316

$22,000,000

$17,855,694

3

1/(1+0.11)^3

0.73119138130

$23,000,000

$16,817,402

$22,000,000

$16,086,210

4

1/(1+0.11)^4

0.65873097415

$23,000,000

$15,150,812

$22,000,000

$14,492,081

5

1/(1+0.11)^5

0.59345132806

$23,000,000

$13,649,381

$22,000,000

$13,055,929

NPV

$8,345,631

NPV

$15,309,734

Computation of IRR for both Projects:

A

B

B

1

Year

Cash Flow (with mitigation)

Cash Flow, C (without mitigation)

2

0

($76,660,000)

($66,000,000)

3

1

$23,000,000

$22,000,000

4

2

$23,000,000

$22,000,000

5

3

$23,000,000

$22,000,000

6

4

$23,000,000

$22,000,000

7

5

$23,000,000

$22,000,000

8

IRR

15.24%

19.86%

Let the excel sheet be looks like as the above table.

To compute IRR for the project with mitigation insert formula in B8 as “=IRR(B2:B7), which will display as 15.24 %

To compute IRR for the project without mitigation insert formula in C8 as “=IRR(C2:C7), which will display as 19.86 %

.

Similar Solved Questions

1 answer
One indicator of a discontinuous innovation is that it: Group of answer choices: it is only...
One indicator of a discontinuous innovation is that it: Group of answer choices: it is only a small improvement from a recent innovation it takes people a while to learn how to use it it doesn't last very long in the marketplace only some people decide it is useful...
1 answer
A piece of DNA that is 3 kb in length is found in many locations throughout...
A piece of DNA that is 3 kb in length is found in many locations throughout the genome. How would you decide whether this was a LINE or a DNA transposon? a. If it is transcribed, then it must be a LINE; if not, then it is a DNA transposon. b. If it has more than 10,000 copies in the genome...
1 answer
A department manager calls you and asks for your help designing a formal policy: “It’s for...
A department manager calls you and asks for your help designing a formal policy: “It’s for hiring vendors. We don’t have a formalized process for selecting and onboarding a new vendor. I want to make sure we know which stakeholders should be involved, what their roles are, and what...
1 answer
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $288,000. Birch reported a $300,000 book value and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 2017, Birch acquired 8
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $288,000. Birch reported a $300,000 book value and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $104,000 w...
1 answer
Robotics 3. ASIMO (Advanced Step in Innovative Mobility is a humanoid robe designed and developed by...
robotics 3. ASIMO (Advanced Step in Innovative Mobility is a humanoid robe designed and developed by Honda. For the food to firmly and on the ground, logs and tons of the robot can be madeled by 100 )+ ()+(2k-100 ) - ) Where, control input it is the toque delivered by a DC motor, the measured ...
1 answer
Item1 1 points Item Skipped eBookPrintReferences Check my work Check My Work button is now enabledItem...
Item1 1 points Item Skipped eBookPrintReferences Check my work Check My Work button is now enabledItem 1Item 1 1 points Item Skipped Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the production manager, responsible for manufacturing, and Michelle Michaels is the mark...
1 answer
Bayou Okra Farms just paid a dividend of $3.95 on its stock. The growth rate in...
Bayou Okra Farms just paid a dividend of $3.95 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 14 percent for the first three years, a return of 12 percent for the next three years, and a return of 10 percent ther...
1 answer
A coworker takes credit for the excellent job you’ve performed. Frustrating! It’s probably happened to you...
A coworker takes credit for the excellent job you’ve performed. Frustrating! It’s probably happened to you or someone you know. How did it happen? Perhaps you shared an idea with a coworker and then hear her present it as her own in a meeting. Or perhaps you worked during the weekend to ...
1 answer
31. -/0.1 points 0/4 Submissions Used My Notes Balance the following equations. (Use the lowest possible whole-number c...
31. -/0.1 points 0/4 Submissions Used My Notes Balance the following equations. (Use the lowest possible whole-number coefficients. These may be zero.) (a) MnO4 (aq) + Cl(aq) = Mn2+ (aq) + Cl2(aq) MnO4 + C + *+ H2O = Mn2+ + Cl2 + H+ + H2O (b) CIO3 aq) + As(5) Æ HCIO(aq) + H3A5O3(aq) Clo, + As ...
1 answer
You are examining two mutants where you are able to quantify the amount of DNA -...
You are examining two mutants where you are able to quantify the amount of DNA - shown below. One of these mutants has a loss of function in the APC and the other mutant has a loss of function in Ras. Match the graph with the mutant and EXPLAIN what about the graphs indicated that it was this mutant...
1 answer
Internal use software costs are: a. always expensed b. always capitalized c. capitalized once the preliminary...
Internal use software costs are: a. always expensed b. always capitalized c. capitalized once the preliminary costs is completed d. capitalized once the preliminary cost is completed and the software will be used to perform the function. ---------- cannot be separated from the entity and sold , tran...
1 answer
Question 2 According to a survey, 13% of motorists in a large city are uninsured. Suppose...
Question 2 According to a survey, 13% of motorists in a large city are uninsured. Suppose that currently 13% of all motorists in this city are uninsured. Two motorists are selected at random from this city. Let x denote the number of motorists in this sample of two who are uninsured. Construct the p...
1 answer
TERE TUPPLE IS 6.16 184 serie REL SAVIN 04 visit 0.10/581 ....******* 11/11 stes D .....
TERE TUPPLE IS 6.16 184 serie REL SAVIN 04 visit 0.10/581 ....******* 11/11 stes D .. l Court Total Fu. Som restria ARD SAV o 3 Points Points Points 12 so19 1857.58 22 Calores MOH BE 8-4 Purchase discounts; gross method On December 28, 2021, Videotech Corporation (VTC) purchased 10 units of a new sa...
1 answer
The following costs result from the production and sale of 1000 drum sets manufactured by Tight...
The following costs result from the production and sale of 1000 drum sets manufactured by Tight Drums Company for the year ended December 31 2019. The drum sets sell for $500 each. The company has a 25% income tax rate $ 17,000 82,000 26,000 15,000 Variable production coats Plastic for casing Uages ...
1 answer
Bill is selling funnel cakes at the county fair
Bill is selling funnel cakes at the county fair. After lunch, he has 2/3 of his original funnel cakes remaining. That evening, when the fair closes, he determines he sold 5/8 of the reaming funnel cakes. What expression can be used to find the fraction of the original funnel cakes Bill sold after lu...
1 answer
Using a prime implicant chart, find all minimum sum-of-products solutions for each of the functions given...
Using a prime implicant chart, find all minimum sum-of-products solutions for each of the functions given in Problem below Q. For each of the following functions, find all of the prime implicants using the Quine- McCluskey method. (a) f(a, b, c, d) = Σ m(0, 3, 4, 5, 7, 9, 11, 13) (b) f(a, b, c...