Reference no: EM13873788
NPV profiles: timing differences
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 12.6%.
Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Discount Rate Plan A Plan B
0
5
10
12
15
17
20
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. %
Is it logical to assume that the firm would take on all available independent, average-risk projects with returns greater than 12.6%?
If all available projects with returns greater than 12.6% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 12.6%, because all the company can do with these cash flows is to replace money that has a cost of 12.6%?
Does this imply that the WACC is the correct reinvestment rate assumption for a project's cash flows?
|
How are the data collection tools similar?
: How are the data collection tools similar? How are they different?
|
|
Profit hospital recognize donated services
: Under what circumstances, if any, would a not for profit hospital recognize donated services and donated drugs in its records?
|
|
How is the american health care system performing compared
: How is the American health care system performing compared to other countries?
|
|
How did people react to the melting of the ice
: How did people react to the melting of the ice? How did their environment change? Compare the cultures in Europe, SW Asia, and Africa?
|
|
Mutually exclusive extraction project-find crossover rate
: 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. Find the crossover rate. Is i..
|
|
How do prospective and retrospective payment agreements
: How do prospective and retrospective payment agreements affect the amount reported as net patient service revenue?
|
|
How simultaneous version of street-garden game be played out
: Find all of the Nash equilibria in this game. How might this simultaneous version of the street-garden game be played out in reality?
|
|
Create a personal disaster recovery plan
: Locate reviews for at least four tools and create a chart that list describes the tool, features, cost and support available. Which would you recommend if cost was an issue? Which would you recommend if cost were not an issue?
|
|
What measure of charity care are hospitals required
: How does charity care affect the patient service revenue reported by hospitals, and what measure of charity care are hospitals required to disclose in the notes to their financial statements?
|