Please do not post answer if you don\'t know, I have posted this question for a
ID: 1943656 • Letter: P
Question
Please do not post answer if you don't know, I have posted this question for a few days now and no one knows the solution or answer to the question.NPV profiles: scale differences
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%.
1. 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 _____%
Graph the NPV profiles for Plan A and Plan B and approximate the crossover rate to the nearest percent.
_____%
2. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to the nearest hundredth.
_______%
Explanation / Answer
Plan A NPV = $12.763183 million Plan B NPV = $10.70 million Plan A IRR = 14.998 % Plan B IRR = 21.963 % cross over rate = 11.26% cross over NPV value = $9.78915663 million