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xRegister for Mind lapMindTlap Cengage Lear X C An Ol diling Company x ure https//ng.cengage.com/static/nb/ui/evo/index html?deploymentid-55165121505 348353947115799&eISBN-97813056359758id; 3166568148ksnapshotild Efl chrome G Google M Starred sadaft@mChrome Tum off AP Students Getting StTo Do/ Completed Review Questions Q Search this course ework An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $11.4 million. Under Plan A,all the oll would be extracted in 1 year, producing a cash flow at t -1 of $13.68 million. Under Plan B, cash flows would be $2.0257 million per year for 20 years. The firm\'s WACC is 11.8%. a. Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. If an amount is zero enter \"0. Negative value should be indicated by a minus sign. Discount Rate NPV Plan A NPV Plan B 2.28 million $29.1million 0% million13.19 millin 5.31 million 3.33 million 1.11 million 0.00 million 10 0.94 million 12 0.73million 15 0.43million 17 0.25 million 0.00 million 1.28 milin 20 e here to search

Solution

Cross over rate = 16.41%

	0	1
Cashflow	-11.4	13.68
present value	-11.4	13.68
NPV	2.28
IRR	20.00%
	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20
Cashflow	-11.4	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257
present value	-11.4	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257	2.0257
NPV	29.114
IRR	17.00%