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Capital Budgeting And Project Evaluation: NPV, IRR, MIRR, And Ethical Considerations

Improve capital budgeting knowledge with this assignment solution.

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Capital Budgeting and Project Evaluation: NPV, IRR, MIRR, and EthicalConsiderations1.) IRRProject K costs $46,145.75, its expected cash inflows are $10,000 per year for 9 years, and its WACC is 9%.What is the project's IRR?Round your answer to two decimal places.%Using financial calculatorCF =-46,145.75, and CF1–CF9 = 10,000;IRR =15.9624 % ~ 16%2.) Capital budgeting criteriaA firm with a 13% WACC is evaluating two projects for this year'scapital budget. After-tax cash flows,including depreciation, are as follows:012345Project A-$30,000$10,000$10,000$10,000$10,000$10,000Project B-$90,000$28,000$28,000$28,000$28,000$28,000Calculate MIRR foreach project. Round your answers to two decimal places.Project A_______%Project B_______%Terminal value of A = TVA=10,000(1.13)4+ 10,000(1.13)3+ 10,000(1.13)2+ 10,000(1.13)1+ 10,000= 16,304.74 + 14,428.97 + 12769 +11,300 +10,000= 64,802.71Terminal value of B = TVB= 28,000(1.13)4+ 28,000(1.13)3+ 28,000(1.13)2+ 28,000(1.13)1+ 28,000= 181,447.58MIRRA=30,000(1 + MIRR)5= TVA=30,000(1 + MIRR)5= 64,802.71= (1 + MIRR)5= 64,802.71/30,000= (1 + MIRR)5= 2.16= 1 + MIRR = 1.16651=MIRR = 0.16651 or 16.65%MIRRB=90,000(1 + MIRR)5= TVB=90,000(1 + MIRR)5=181,447.58= (1 + MIRR)5=181,447.58/90,000= (1 + MIRR)5= 2.0161= 1 + MIRR =1.1505=MIRR = 0.1505or15.05%3.) Capital budgeting criteria: ethical considerationsA mining company is considering a new project. Because the mine has received a permit, the project wouldbe legal; but it would cause significant harm to a nearby river. The firm could spend an additional $9.66million at Year 0 to mitigate the environmental problem, but it would not be required to do so. Developingthe mine (without mitigation) would cost $57 million, and the expected net cash inflows would be $19million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $20 million.The risk adjusted WACC is 10%.Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answerfor NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55.NPV $______millionCF0=-($57 + $9.66) million =-$66.66million[initial investment with mitigation]

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