What are the npv and irr of this project

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After discovering gold in Colorado's mountains, ABC mining must decide whether to mine the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. To proceed with the extraction, ABC Co. must spend $900,000 for new mining equipment and pay $165,000 for its installation. The mined gold will net the company a projected $350,000 each year over the 5 year life of the mine. ABC Co's cost of capital is 14%. Assume the cash inflows occur at the end of the year:

1) What are the NPV and IRR of this project?

2) Should this project be undertaken ignoring environmental Concerns? Why or why not?

3) How should environmental effects be considered when evaluating this, or any other project? How might these affects change your decision in Part b?

 

Reference no: EM13285522

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