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An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an...

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Finance

An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an initial outlay at t = 0 of $11 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $13.2 million. Under Plan B, cash flows would be $1.9546 million per year for 20 years. The firm's WACC is 12.7%.

  1. Construct NPV profiles for Plans A and B. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. If an amount is zero, enter "0". Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places.

    Discount Rate NPV Plan A NPV Plan B
    0 % $ million $ million
    5 million million
    10 million million
    12 million million
    15 million million
    17 million million
    20 million million

    Identify each project's IRR. Do not round intermediate calculations. Round your answers to two decimal places.

    Project A: %

    Project B: %

    Determine the crossover rate. Approximate your answer to the nearest whole number.

    %

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