An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $13 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $15.6 million. Under Plan B, cash flows would be $2.31 million per year for 20 years. The firm's WACC is 11.2%.

Construct NPV profiles 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 sign. Do not round intermediate calculations. Round your answers to two decimal places.

Discount Rate	NPV Plan A	NPV Plan B
0%
5
10
12
15
17
20

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. %

Is it logical to assume that the firm would take on all available independent, average-risk projects with returns greater than 11.2%? -Select-Yes No If all available projects with returns greater than 11.2% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 11.2%, because all the company can do with these cash flows is to replace money that has a cost of 11.2%? -Select-Yes No Does this imply that the WACC is the correct reinvestment rate assumption for a project's cash flows?

Select-Yes No