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CAPITAL BUDGETING CRITERTA: ETHICAL CONSIDERATIONS An dlectric utility is cansidering a new power plant in northern Arizona. Power from the plant wauld be sold in the Phocnix area, where it is badly needed. Because the firm has received a permit, the plarnt would be legal; but it would cause some air pallution. The compay could spend an additional 40 million at ear 0 o mitigate the environmental problem but it would not be re u red o do so. The plant without mitigation would cost 270.22 million, and the expe ed cash rf os would be S90 million per year or 5 years f the firm does invest in mitigation the annual inflows would be $94.08 million unempluyrnent in the area where the plant would be built is high, and the plant would provide about 350 good jobs The nsk adjusted ACC is 17% a. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be Indicated by a minus sign. millian 96 Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55 NPV 96 b. How should the environmental effects be dealt with when evaluating this project? L. The environmental effects if not mitigated would result In additional cash ows. Therefore, since the plant is legal without mitigatlon, there are no benefits to perforing a "no mitgation analysis. L. The environmental effects should be ignored since the plant is legal without mitigation IlL. The environmental effects should be treated as a sunk cost and therefore ignored IV. If the utiity 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 any costs of "ill l for not mitigating for the environmental effects have been considered in the original analysis. V. The environmental effects should be treated as remote possibility and should only be considered at the time in which they actually occur