An oil drilling company must choose between two mutually

Reference no: EM13596696

An oil drilling company must choose between two mutually exclusive extraction projects, and each costs $11 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $13.2 million. Under Plan B, cash flows would be $1.9546 million per year for 20 years. The firm's WACC is 12.8%.

a.Construct NPV profiles for Plans A and B. Round your answers to two decimal places.
Discount Rate NPV Plan A NPV Plan B
0% $...... million $....... million
5 $...... million $....... million
10 $...... million $....... million
12 $...... million $....... million
15 $....... million $....... million
17 $....... million $...... million
20 $....... million $...... million

Identify each project's IRR. Round your answers to two decimal places.

Project A %
Project B %

Find the crossover rate. Round your answer to two decimal places.
%

Reference no: EM13596696

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