An oil-drilling company must choose between two mutuallyexclusive extraction projects, and each requires an initial outlayat t = 0 of $11.2 million. Under Plan A, all the oil would beextracted in 1 year, producing a cash flow at t = 1 of $13.44million. Under Plan B, cash flows would be $1.9901 million per yearfor 20 years. The firm's WACC is 11.2%.

1. Construct NPV profiles for Plans A and B. Enter your answers inmillions. For example, an answer of $10,550,000 should be enteredas 10.55. If an amount is zero, enter "0". Negative values, if any,should be indicated by a minus sign. Do not round intermediatecalculations.

   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 intermediatecalculations.

   Project A: ?%

   Project B: ?%

   Find the crossover rate. Do not round intermediatecalculations.

   ?%

Yes/No questions:

Is it logical to assume that the firm would take on allavailable independent, average-risk projects with returns greaterthan 11.2%?

If all available projects with returns greater than 11.2% havebeen undertaken, does this mean that cash flows from pastinvestments have an opportunity cost of only 11.2%, because all thecompany can do with these cash flows is to replace money that has acost of 11.2%?

Does this imply that the WACC is the correct reinvestment rateassumption for a project's cash flows?