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(Payback period and NPV calculations) Plato Energy is an oil and gas exploration and development company located in Farmington, New Mexico. The company drills shallow wells in hopes of finding significant oil and gas deposits. The firm investment but provides cash flows is considering two different de successful over a much longer period of time then the Gulf Coast opportunity. In addition, the longer life of the Bamett Shale project also results in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure involves pumping either water or CO, down into the wells in order to increase the flow of oil and gas from the structure. The expected cash flows for the two projects are as follows: 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 alternative? What are the limitations of the payback period ranking? That is, what does the payback period not consider that is important in determining the value creation potential of these two projects? 6. If Plato's management uses a discount rate of 20.5 percent to evaluate the present values of its energy investment projects, what is the NPV of the two proposed investments? d. What is your estimate of the value that will be created for Plato by the acceptance of each of these two investments? a. Given the cash flow information in the table, the payback period of the Bamet: Shale project is years. (Round to two decimal places.) - X Data table Year 0 1 Gulf Coast $(1,100,000) 900,000 900,000 450,000 140,000 2 Barnett Shale $(5,200,000) 2.000.000 2,080,000 (1,040,000) 2.000.000 1.800.000 1,800,000 1,680,000 950,000 400.000 120.000 3 4 5 6 7 8 10