Question: company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would rovide expected cash
company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would rovide expected cash flows of $6.39 million per year fot 20 years. Plan B requires a $11 million expenditure to bulld a somewhat less efficient, more laborntensive plant with an expected cash flow of $2.47 million per year for 20 years. The firm's Wacc is 10%. The data has been collected in the Microsoft Excel Onlline file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Calculate each project's NPV. Round your answers to two decimal places. D not round your intermedlate calculations, Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55, Plan A: 5 million Plan B:$ million Calculate each project's IRR. Round your answer to twe decimal places. Pan A: Plan B: b. By graphing the NPV profles for Plan A and Plan 8 , 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. a. Why is NPV better than IRR for making copital budgoting decisions that add to shareholder velue? The input in the box below will not be graded, but may be reviewed and considered by your instructor
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