CENGAGE MINDTAP

Ch 11-End-of-Chapter Problems - The Basics of Capital Budgeting

III

IV

V

L. The environmental effects if not mitigated could result in additional loss of cash flows and/or fines and penalties due to il will among customers, 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 "no mitigation analysis from not doing the

environmental mitigation

II. The environmental effects should be ignored since the mine is legal without mitigation

III. The environmental effects should be treated as a sunk cost and therefore ignored.

IV. The enviromental effects if not mitigated would result in additional cash flows. Therefore, since the mine is legal without mitigation, there are no benefits to performing a "nu

V. The environmental effects should be treated as a remote possibility and shou

and should only be considered at the time in which they actually occu

s project be undertaken?

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would the fim do the mitigation?

1. Under the assumption that all costs have been considered, the company would not mitigate for the environmental impact of the project since s IRR without mitigation is

greater than ts RR when mitigation costs are inclated in the analys

II. Under the assumption that all costs have been considered the company would mitgete for the environmental impact of the project since its NPV with mitigation is greater

than its NPV when mitigation costs are not included in the analys

III. Under the assumption that all costs have been considered the company would not mitigate for the environmental impact of the project since Rs NPV without mitigation is

greater than its NPV when mitigation costs are included in the analy

acc

IV. Under the assumption that all costs have been considered, the company would mngate for the environmental impact of the project since its IRR with mitigation is greater

than its IRR when mitigation costs are not included in the analysis

V. Under the sampion that all costs have been considered the company would not mitigate for the environmental impact of the project since its NPV with mitigation is greater

than its NPV when

are not in the analysis

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