An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an initial outlay at t = 0 of $12.6 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $15.12 million. Under Plan B, cash flows would be $2.2389 million per year for 20 years. The firm's WACC is 11.1%.

1. 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%		$ million	$ million
   5%		million	million
   10%		million	million
   12%		million	million
   15%		million	million
   17%		million	million
   %20		million	million

   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.

   %

2. Is it logical to assume that the firm would take on all available independent, average-risk projects with returns greater than 11.1%?

   Yes or No

   If all available projects with returns greater than 11.1% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 11.1%, because all the company can do with these cash flows is to replace money that has a cost of 11.1%?

   Yes or No

   Does this imply that the WACC is the correct reinvestment rate assumption for a project's cash flows?

   Yes or No