CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS 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 $$40$ million at Year $0$ to mitigate the environmental problem, but it would not be required to do so$.$ The plant without mitigation would cost $$240$ 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$ 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 $17\%.$

a$.$ Calculate the NPV and IRR with and without mitigation.

b$.$ How should the environmental effects be dealt with when evaluating this project?

c$.$ Should this project be undertaken? If so$,$ should the firm do the mitigation? Why or why not?