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Calculate a cross-over rate between plan a and plan b

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Reference no: EM132504239

The Ross Oil Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans have the following cash flows. The required return on these projects is 6%.

Year Plan A Plan B

0 ($500) (400)

1 320 250

2 340 280

NPV 104.48 ?

IRR ? 20.56%

1. Net present value (NPV) for Plan B.

2. Internal rate of return (IRR) for Plan A.

3. Which Plan should be selected and why?

4. Calculate a "cross-over" rate between Plan A and Plan B?

Reference no: EM132504239

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