An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoe

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An electric utility is considering a new power plant in northern
Arizona. Power from the plant would be sold in the Phoenix area,
where it is badly needed. Because the firm has received a permit,
the plant would be legal; but it would cause some air pollution.
The company could spend an additional $40 million at Year 0 to
mitigate the environmental problem, but it would not be required to
do so. The plant without mitigation would require an initial outlay
of $240.31 million, and the expected cash inflows would be $80
million per year for 5 years. If the firm does invest in
mitigation, the annual inflows would be $84.22 million.
Unemployment in the area where the plant would be built is high,
and the plant would provide about 350 good jobs. The risk adjusted
WACC is 19%.
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. Negative values, if any, should be indicated by a
minus sign. Do not round intermediate calculations. Round your
answers to two decimal places.
NPV: $ million
IRR: %
Calculate the NPV and IRR without mitigation. Enter your answer
for NPV in millions. For example, an answer of $10,550,000 should
be entered as 10.55. Negative values, if any, should be indicated
by a minus sign. Do not round intermediate calculations. Round your
answers to two decimal places.
NPV: $ million
IRR: %
How should the environmental effects be dealt with when
evaluating this project?
-Select-IIIIIIIVVItem 5
Should this project be undertaken?
-Select-IIIIIIIVVItem 6