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A L0IN33 builder  company is deciding to undertake a pr0ject. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing

A L0IN33 builder  company is deciding to undertake a pr0ject. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A L0IN33 builder  company is deciding to undertake a pr0ject. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing additional 10 million at Year 0 but legally it is n0t compulsory for it to do so. Undertaking this project would cost $60 million without mitigation. If the firm does invest in mitigation, the annual cash inflows would be $22 million. The risk adjusted WACC is 12%.

 

  • Calculate the NPV and IRR with and without mitigation
  • Should the project be undertaken? If so, should the firm do mitigation

Note please tell me how to find  pv factor@19% and 20%/discounting 19% and 20%

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