An eloctric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badiy needed. Because the firtr has celved a permat, the plant would be legal; but it would cause some air pollution. The company could 5 pend an additionat $40 million at Year 0 to mithpate the environmental ioblem, but it would not be required to do so. The plant without mitigation would require an in ital cutlay of $270.82 mirson, and the expected cash inflows would be $90. illion per year for 5 years. If the firm does invest in mitigation, the annual infiows would be $93.82 million, yyemployment in the area where the plant would be buit 6 high, ad the plant would provide about 350 good jobs. The risk adjusted WACC is 17%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negativi values, if any, should be indicated by a minus sign. Do not round intermediote calcilations. Round yoar answers to two decimal places. NPPV: 5 million TRR: Calculate the NPY and tire without mitigation. Entef your answer for NPV in millons. For examgle, an answer of 510,550,000 should be entered as 10.55. Negative values, if atry, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places. NPV: 5 million tRR: * b. How should the environmental effects be dealt with when evaluating this project? 1. If the utility mitigates tor the environmentnl effects, the project is not acceptable. However, before the company chooses to do the project without miligation, it needs to make sure that any costs of "ill will for not mitigating for the envir conmental effects have been consisered in the original analysis II. The environmental effects shoyld be treated as a remote possibility and should only be considered at the time in which they actually occur. III. The environemental effects if not mitigated would result in addational cash flows. Tharefore, since the plant is legal without mitigation, there are no benetits to performing a "ro mitigation" analysks: 1V. The amironasental elfects should be ignored since the plant is lagal without mitigation b. How should the environmental effects be dealt with when evaluating this project? 1. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that ary costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysk. 11. The ervironmental effects should be treated as a remote possibility and should only be conitifigred at the time in which they actually occur. III. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysls. IV. The environmental effects should be ignored since the plant is legal without mitigation. V. The environmental effects shoukd be treated as a sunk cost and therefore ignored. Ci should this project be undertaken? 1. The project should be undertaken since the IRr is positive under both the "mitigation" and "no mitigation" assumptions, 11. The project shoild be undertaken since the NPY is positive under both the "mitigation" and "no mitigation" assumptions. II. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken. N. The project should be undertaken only if they do not mitigate for the environmental effects. However, they have to make sure that they've done the analysis properly to avoid any "ill wilf" and additional "costs" that might result from undertaking the project without concem for the environemental impacts V. The project shoeld be undertaken only under the "mitigation" assumption.