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.
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?