ayback period and NPV calculations) Plato Energy is an oil and gas exploration and development company...

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ayback period and NPV calculations) Plato Energy is an oil and gas exploration and development company located in Farmington, New Mexico. The company lls shallow wells in hopes of finding significant oil and gas deposits. The firm is considering two different drilling opportunities that have very different production tentials. The first is in the Barnett Shale region of central Texas and the other is in the Gulf Coast. The Barnett Shale project requires a much larger initial westment but provides cash flows (if successful) over a much longer period of time than the Gulf Coast opportunity. In addition, the longer life of the Barnett Shale oject also results in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure wolves pumping either water or CO2 down into the wells in order to increase the flow of oil and gas from the structure. The expected cash flows for the two ojects are as follows: What is the payback period for each of the two projects? Based on the payback periods, which of the two projects appears to be the best alternative? What are the limitations of the payback period ranking? That is, hat does the payback period not consider that is important in determining the value creation potential of these two projects? If Plato's management uses a discount rate of 19.5 percent to evaluate the present values of its energy investment projects, what is the NPV of the two oposed investments? Given the cash flow information in the table, the payback period of the Barnett Shale project is years. (Round to two decimal places.) ayback period and NPV calculations) Plato Energy is an oil and gas exploration and development company located in Farmington, New Mexico. The company lls shallow wells in hopes of finding significant oil and gas deposits. The firm is considering two different drilling opportunities that have very different production tentials. The first is in the Barnett Shale region of central Texas and the other is in the Gulf Coast. The Barnett Shale project requires a much larger initial westment but provides cash flows (if successful) over a much longer period of time than the Gulf Coast opportunity. In addition, the longer life of the Barnett Shale oject also results in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure wolves pumping either water or CO2 down into the wells in order to increase the flow of oil and gas from the structure. The expected cash flows for the two ojects are as follows: What is the payback period for each of the two projects? Based on the payback periods, which of the two projects appears to be the best alternative? What are the limitations of the payback period ranking? That is, hat does the payback period not consider that is important in determining the value creation potential of these two projects? If Plato's management uses a discount rate of 19.5 percent to evaluate the present values of its energy investment projects, what is the NPV of the two oposed investments? Given the cash flow information in the table, the payback period of the Barnett Shale project is years. (Round to two decimal places.)