11-16 NPV PROFILES: SCALE DIFFERENCES A company is considering two mutually exclusive expansion plans. Plan A requires a

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11 16 Npv Profiles Scale Differences A Company Is Considering Two Mutually Exclusive Expansion Plans Plan A Requires A 1 (56.32 KiB) Viewed 29 times

11-16 NPV PROFILES: SCALE DIFFERENCES 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 $6.4 million per year for 20 years. Plan B requires a $12 million expenditure to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.72 million per year for 20 years. The firm's WACC is 10%. a. Calculate each project's NPV and IRR. b. Graph the NPV profiles for Plan A and Plan B and approximate the crossover rate. C. Why is NPV better than IRR for making capital budgeting decisions that add to shareholder value?