Question: A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would provide expected
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.39 million per year for 20 years. Plan B requires a $15 milion expenditure to build a somewhat less eficient, more laborintensive plant with an expected cash flow of $3.36 malion per year for 20 years. The firm's WACC is 996 . 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. Open sqreadsheet 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 . Pian A: $ milion Pian B: $ mition Calculate each project's IRR. Round your answer to two decimal places. Plan A: Pian B: b. By graphing the NPV profiles for Pian A and Plan B, approximate the crossover rate to the nearest percent. c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. d. Why is NPV better than IRR for making capital budgeting decisions that add to shareholder volue? The input in the box below wil not be graded, but may be revlewed and considered by your instructor
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