16. An electric utility is considering a new power plant innorthern Arizona. Power from the plant would be sold in the Phoenixarea, where it is badly needed. Because the firm has received apermit, the plant would be legal; but it would cause some airpollution. The company could spend an additional $40 million atYear 0 to mitigate the environmental problem, but it would not berequired to do so. The plant without mitigation would cost $210.08million, and the expected cash inflows would be $70 million peryear for 5 years. If the firm does invest in mitigation, the annualinflows would be $76.02 million. Unemployment in the area where theplant would be built is high, and the plant would provide about 350good jobs. The risk adjusted WACC is 19%. Calculate the NPV and IRRwith mitigation. Round your answers to two decimal places. Enteryour answer for NPV in millions. Do not round your intermediatecalculations. For example, an answer of $10,550,000 should beentered as 10.55. Negative value should be indicated by a minussign. NPV $ million IRR % Calculate the NPV and IRR withoutmitigation. Round your answers to two decimal places. Enter youranswer for NPV in millions. Do not round your intermediatecalculations. For example, an answer of $10,550,000 should beentered as 10.55. NPV $ million IRR % How should the environmentaleffects be dealt with when evaluating this project? Theenvironmental effects should be treated as a sunk cost andtherefore ignored. If the utility mitigates for the environmentaleffects, the project is not acceptable. However, before the companychooses to do the project without mitigation, it needs to make surethat any costs of "ill will" for not mitigating for theenvironmental effects have been considered in the originalanalysis. The environmental effects should be treated as a remotepossibility and should only be considered at the time in which theyactually occur. The environmental effects if not mitigated wouldresult in additional cash flows. Therefore, since the plant islegal without mitigation, there are no benefits to performing a "nomitigation" analysis. The environmental effects should be ignoredsince the plant is legal without mitigation. Should this project beundertaken? The project should be undertaken since the NPV ispositive under both the "mitigation" and "no mitigation"assumptions. Even when no mitigation is considered the project hasa negative NPV, so it should not be undertaken. The project shouldbe undertaken only if they do not mitigate for the environmentaleffects. However, they want to make sure that they've done theanalysis properly due to any "ill will" and additional "costs" thatmight result from undertaking the project without concern for theenvironmental impacts. The project should be undertaken only underthe "mitigation" assumption. The project should be undertaken sincethe IRR is positive under both the "mitigation" and "no mitigation"assumptions.