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A company is considering two mutually exclusive choices for constructing a plant. Plant A requires a $35 million initial outlay and would provide expected
A company is considering two mutually exclusive choices for constructing a plant. Plant A requires a $35 million initial outlay and would provide expected cash flows of $2.5 million per year for 30 years. Plant B requires $15 million initial outlay and would provide expected cash flows of $1.5 million per year for 30 years. The firm's WACC is 11%. Construct the differences in cash flows and calculate the crossover rate where the two projects' NPVs are equal.
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