Part 4 Projects and Their Valuation (10-15) Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $50 million on a large-scale, integrated plant that will provide an expected cash flow stream of $8 million per year for 20 years. Plan B calls for the expenditure of $15 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.4 million per year for 20 years. The firm's cost of capital is 10%. 2. Calculate each project's NPV and IRR. b. Set up a Project A by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. What are the NPV and the IRR for this Project ? c. Graph the NPV profiles for Plan A. Plan B, and Project A. Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $25 million per year. She plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares is expected to be mera, and the company's cost of capital is 12%. By how much would the value of the company increase if it accepted the better project (plane? What is the equivalent annual annuity for each plane? (10-16) Unequal Lives