Barlow Company is considering two capital investments. Both investments have an initial cost of $6,000,000 and total net cash inflows of $14,000,000 over 10 years. Barlow requires a 20% rate of return on this type of investment. Expected net cash inflows are as follows: Year Plan Alpha Plan Beta Year 1 $ 1,400,000 $ 1,400,000 1,800,000 Year 2 2 1,400,000 Year 3 1,400,000 2,200,000 1,800,000 Year 4 1,400,000 1,400,000 Year 5 1,400,000 Year 6 1,400,000 700,000 Year 7 1,400,000 600,000 Year 8 500,000 Year 9 1,400,000 1,400,000 1,400,000 400,000 3,200,000 Year 10 $ 14,000,000 $ 14,000,000 Total Requirement 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? (Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, X.XX%.) The NPV (net present value) of Plan Alpha is The NPV (net present value) of Plan Beta is The IRR (internal rate of return) of Plan Alpha is %. The IRR (internal rate of return) of Plan Beta is %. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? Based on the relationship described above, the internal rate of return and net present value calculated in Requirement 1 for the two plans as expected. For Plan Alpha, the net present value is and the internal rate of return is the required rate of return. For Plan Beta, the net present value is and the internal rate of return is the required rate of return. Requirement 3. After further negotiating, the company can now invest with an initial cost of $5,600,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? (Use Excel to determine your answers. Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, X.XX%.) The NPV (net present value) of Plan Alpha is $ The NPV (net present value) of Plan Beta is $ The IRR (internal rate of return) of Plan Alpha is %. The IRR (internal rate of return) of Plan Beta is %. Which plan, if any, should the company pursue? O A. If the company has sufficient resources and the plans are not mutually exclusive, it should pursue both plans because the NPV is positive and the IRR is greater than the company's required rate of return for both plans. If the company must choose only one plan, it should pursue Plan Alpha because it has the lower NPV and IRR. B. If the company has sufficient resources and the plans are not mutually exclusive, it should pursue both plans because the NPV is positive and the IRR is greater than the company's required rate of return for both plans. If the company must choose only one plan, it should pursue Plan Beta because it has the higher NPV and IRR. O C. The company should not pursue either plan because the NPV is negative and the IRR D. The company should not pursue either plan because the NPV is positive and the IRR is greater than the company's required rate of return for both plans
