A company is considering two mutually exclusive expansion

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A company is considering two mutually exclusive expansion plans. Plan A requires a $39 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.23 million per year for 20 years. Plan B requires a $13 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.91 million per year for 20 years. The firm's WACC is 10%.

a.Calculate each project's NPV. Round your answer to two decimal places.

Plan A $ million ?
Plan B $ million ?

Calculate each project's IRR. Round your answer to two decimal places.

Plan A % ?
Plan B % ?

b.Graph the NPV profiles for Plan A and Plan B and approximate the crossover rate to the nearest percent?

c.Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to the nearest hundredth?

Reference no: EM13596689

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