Chastain Corporation is considering two mutually exclusive expansion plans. Plan J requires a PKR60million expenditure on a large-scale integrated plant that would provide expected cash flows of PKR8.5million per year for 15 years. Plan S requires a PKR6 million expenditure to build a somewhat less efficient, more labor-intensive plant with expected cash flows of

PKR1.5million per year for 15 years. The firm's WACC is 6%.[8marks]

a)Calculate each project's NPV. [2marks]

b)Calculate profitability index of the two projects. [2marks]

c)Following information provided below, graph the NPV profiles for Plan J and Plan S and approximate the crossover rate. [4marks]

WACC NPV (Plan J) PKR millions NPV (Plan S) PKR millions

0.00% 67.50 16.50

5.00% 26.88 9.11

10.00% 4.23 4.92

11.00% 1.01 4.31

11.34% 0.00 4.12

15.00% -8.95 2.41

20.00% -16.88 0.84

24.00% -20.96 0.00