Scale Differences

The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $$56$ million on a large$-$scale, integrated plant

that will provide an expected cash flow stream of $$9$ million per year for $20$ years. Plan B calls for the expenditure of $$12$ million to build a somewhat less efficient, more

labor$-$intensive plant that has an expected cash flow stream of $$3\mathrm{.}8$ million per year for $20$ years. The firm's cost of capital is $11\%.$

a$.$ Calculate each project's NPV$.$ Do not round intermediate calculations. Round your answers to the nearest dollar.

Project A: $

Project B: $

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

Project A:

$\%$

Project B:

$\%$

b$.$ Set up a Project $\frac{?}{{?}_{\frac{?}{?}}}$ by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. Round your answers to the nearest dollar.

Use a minus sign to enter cash outflows, if any.

What is the NPV for this Project $\frac{?}{{?}_{\frac{?}{?}}}?$ Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter negative value, if any.

$

What is the IRR for this Project $\frac{?}{{?}_{\frac{?}{?}}}?$ Round your answer to two decimal places.

$\%$

C$.$ Select the correct graph for the NPV profiles for Plan A$,$ Plan B$,$ and Project $\frac{?}{{?}_{\frac{?}{?}}}.$

A

B

C