Need some help with Finance! WILL RATE! A company is considering two mutually exclusive expansion plans. Plan A requires
Posted: Sat Mar 19, 2022 5:55 pm
Need some help with Finance!
WILL RATE!
A company is considering two mutually exclusive expansion plans.
Plan A requires a $41 million expenditure on a large-scale
integrated plant that would provide expected cash flows of $6.55
million per year for 20 years. Plan B requires a $13 million
expenditure to build a somewhat less efficient, more
labor-intensive plant with an expected cash flow of $2.91 million
per year for 20 years. The firm's WACC is 9%.
Calculate each project's NPV. Round your answers to two decimal
places. Do not round your intermediate calculations. Enter your
answers in millions. For example, an answer of $10,550,000 should
be entered as 10.55.
Plan A: $ (fill in the blank) million
Plan B: $ (fill in the blank) million
Calculate each project's IRR. Round your answer to two decimal
places.
Plan A: (fill in the blank) %
Plan B: (fill in the blank) %
By graphing the NPV profiles for Plan A and Plan B, approximate
the crossover rate to the nearest percent.
(fill in the blank) %
Calculate the crossover rate where the two projects' NPVs are
equal. Round your answer to two decimal places.
(fill in the blank) %
Briefly explain why is NPV better than IRR for making capital
budgeting decisions that add to shareholder value?
WILL RATE!
A company is considering two mutually exclusive expansion plans.
Plan A requires a $41 million expenditure on a large-scale
integrated plant that would provide expected cash flows of $6.55
million per year for 20 years. Plan B requires a $13 million
expenditure to build a somewhat less efficient, more
labor-intensive plant with an expected cash flow of $2.91 million
per year for 20 years. The firm's WACC is 9%.
Calculate each project's NPV. Round your answers to two decimal
places. Do not round your intermediate calculations. Enter your
answers in millions. For example, an answer of $10,550,000 should
be entered as 10.55.
Plan A: $ (fill in the blank) million
Plan B: $ (fill in the blank) million
Calculate each project's IRR. Round your answer to two decimal
places.
Plan A: (fill in the blank) %
Plan B: (fill in the blank) %
By graphing the NPV profiles for Plan A and Plan B, approximate
the crossover rate to the nearest percent.
(fill in the blank) %
Calculate the crossover rate where the two projects' NPVs are
equal. Round your answer to two decimal places.
(fill in the blank) %
Briefly explain why is NPV better than IRR for making capital
budgeting decisions that add to shareholder value?