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An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an initial outlay at t = 0 of $12 million. Under
An oil-drilling company must choose between two mutually exclusive extraction projects, and each requires an initial outlay at t = 0 of $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 11.3%. a. 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% x $ 2.4 million $ million 5 million million 10 x million million 12 million million 15 x million million 17 million million 20 0.00 8 million million Identify each project's IRR. Do not round intermediate calculations. Round your answers to two decimal places. Project A: 20 Project B: Find the crossover rate. Do not round intermediate calculations. Round your answer to two decimal places
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