Question $9(1$ point$)$

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 $$33$ million at Year $0$ to mitigate the environmental problem, but it would not be required to do so$.$ The plant without mitigation would cost $$213$ million, and the expected cash inflows would be $$63$ million per year for $5$ years. If the firm does invest in mitigation, the annual inflows would be $$83$ 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 $10\%.$

a$)$ Calculate the IRR without mitigation.

b$)$ Calculate the IRR with mitigation.

a$)8\mathrm{.}55\%$; b$)26\mathrm{.}95\%$

a$)14\mathrm{.}64\%$; b$)20\mathrm{.}41\%$

a$)26\mathrm{.}19\%$; b$)19\mathrm{.}86\%$

a$)10\mathrm{.}00\%$; b$)10\mathrm{.}00\%$

a$)20\mathrm{.}23\%$; b$)14\mathrm{.}17\%$