18.

An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an initial outlay at t=0 of $12.8 miltion. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t=1 of $15.36 million. Under Plan B, cash flows would be $2.2744 million per year for 20 years. The firm's WACC is 12.3%. 3. Construet Nin profites 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 sion. Do not round intermediate calculations. Round your answers to two decimal places. Ifentify each project s IRR. Do not round intermediate calculations, Round vour answeis to two deciral (places Prolect a: Identify each project's IRR, Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: Find the crossover rate. Do not round intermediate calculations, Round your answer to two decimal places. % b. Is it logical to assume that the firm would take on all avalable independent, average-risk projects with returns greater than 12.3% ? If all avaltable prolects with returns greater than 12 a\% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 12.99 , because all the company can do with these Ooss thin imply that the wacc is the correct reinvestment cate assumption for a project's cash flows