c.Should this project be undertaken? If so, should the firm do the mitigation?
11-9 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 inmitigation, the annual inflows would