Question
An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $12 million. Under Plan A, all the oil would be extracted
An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $12 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $14.4 million. Under Plan B, cash flows would be $2.1323 million per year for 20 years. The firm's WACC is 12.1%.
A) Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. If an amount is zero enter "0". Negative value should be indicated by a minus sign.
Discount Rate NVP PLAN A NVP PLAN B
0%$ _________ million$ ________ million
5 _________ million$ ________ million
10 _________ million$ ________ million
12 _________ million$ ________ million
15 _________ million$ ________ million
17 _________ million$ ________ million
20 _________ million$ ________ million
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