A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.55 million per vear 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 ear for 20 years. The firm's WACC is 10%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

x

Open spreadsheet

a. Calculate each project's NPV. 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.

Plan A: $

million

Plan B: $

million

Calculate each proiect's IRR. Round your answer to two decimal places.

Plan A:

o/.

Plan B:

%

b. By graphing the NPV profiles for Plan A and Plan B, approximate the crossover rate to the nearest percent.

Activity- NPV profiles

Question 1

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O

Plan A: $

million

Plan B: $

million

Calculate each project's IRR. Round your answer to two decimal places.

Plan A:

%

Plan B:

%

b. By graphing the NPV profiles for Plan A and Plan B, approximate the crossover rate to the nearest percent.

%

1. Calculate the crossover rate where the two projects* PV are equal. Round your answer to two decimal places. o/o
2. Why is NPV better than IRR for making capital budgeting decisions that add to shareholder value?