(Answered) Calculate the NPV with Mitigation

Economics

Problem: A mining company is considering a new project. 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 company does invest in mitigation, the annual inflows would be $21 million. The risk adjusted WACC is 15%.

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Question: Calculate the NPV with Mitigation? Please show steps how you get an answer and please be clear in your explanation.

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Macroeconomics, Economics

Category:- Macroeconomics
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