Please answer both questions a. and b. Also, provide a full explanation, not just Excel screenshots.

a 8. You are a member of the business development group for a firm that is a partner in a consortium considering the submission of a proposal to build and operate a merchant power plant in a developing country. The consortium is considering two designs; one will utilize coal as a source of fuel while the other will use gas. The major uncertainty is a pending environmental law that will significantly affect the profitability of coal. You have made the following estimates for each alternative: Annual Net Cash Flow ($M) Technology Initial Investment ($M) State l: new environmental law is enacted Coal 100 Gas 200 State 2: new environmental law is not enacted Coal 100 Gas 200 10 40 30 40 a. Calculate the NPV of each possible outcome if the discount rate is 15%, the concession period is 25 years following construction completion and construction is completed in period 0. b. Your staff has estimated that the new environmental law has a 60% chance of being enacted this year: if it is not enacted this year, you can assume that it will not impact your plant. Draw the decision tree. If you base your recommendation upon expected value, what is the preferred choice