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(Payback period and NPV calculations) Plato Energy is an oil and gas exploration and devolopenent company located in Farmington. Now Mexico The company drils thallow wells in hopes of finding significant oil and gat deposits. The firm is considering two ditlerent drillong oppertunitios that have very different production potentials. The first is in the Bamant Shale region of central Texas and the other is in the Gulf Coast. The Bament Shalo projoct requies a much laiger initial imvostreent but provides casth flows (d successful ever a much longer period of time than the Gulf Coest opportunity. In addition, the longer life of the Bamett Shale peoject also resulbs in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure invohes puamping edler water or CO2 down into the walls in ordor to increase the flow of oll and gas from the structure. The expected cash flows for the two projects are as lallows a. What is the payback period for each of the two projects? b. Based on the payback periods, which of the two projects appears to be the best aliemative? What are the Imitations of the payback period ranking? That is, what does the payback period not consider that is important in determining the valuo creation potontial of these two projocts? c. H Plato's managoment usen a discount rale of 204 percent to evaluate the present values of im energy investment profocts, what is the NPV of the hwo proposed investments? d. What is your estimate of the value that wil be created for Plato by the acceptance of tach of these fro investmenta? a. Given the cash flow information in the fable, the payback period of the Barnelt Shalo project is years (Round to tho decmal places) in Farming Data table ave very dit er initial inv O2 down in of the pay rojects, wh two decim (Civer (Payback period and NPV calculations) Plato Energy is an oil and gas exploration and devolopenent company located in Farmington. Now Mexico The company drils thallow wells in hopes of finding significant oil and gat deposits. The firm is considering two ditlerent drillong oppertunitios that have very different production potentials. The first is in the Bamant Shale region of central Texas and the other is in the Gulf Coast. The Bament Shalo projoct requies a much laiger initial imvostreent but provides casth flows (d successful ever a much longer period of time than the Gulf Coest opportunity. In addition, the longer life of the Bamett Shale peoject also resulbs in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure invohes puamping edler water or CO2 down into the walls in ordor to increase the flow of oll and gas from the structure. The expected cash flows for the two projects are as lallows a. What is the payback period for each of the two projects? b. Based on the payback periods, which of the two projects appears to be the best aliemative? What are the Imitations of the payback period ranking? That is, what does the payback period not consider that is important in determining the valuo creation potontial of these two projocts? c. H Plato's managoment usen a discount rale of 204 percent to evaluate the present values of im energy investment profocts, what is the NPV of the hwo proposed investments? d. What is your estimate of the value that wil be created for Plato by the acceptance of tach of these fro investmenta? a. Given the cash flow information in the fable, the payback period of the Barnelt Shalo project is years (Round to tho decmal places) in Farming Data table ave very dit er initial inv O2 down in of the pay rojects, wh two decim (Civer

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