NPV profiles: timing differences

An oil drilling company must choose between two mutually exclusive extraction projects, and each costs $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 12.2%.

a. Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55.

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. Round your answers to two decimal places. Project A _____ % Project B______ % Find the crossover rate. Round your answer to two decimal places. _____%

b. Is it logical to assume that the firm would take on all available independent, average-risk projects with returns greater than 12.2%? Yes or No

If all available projects with returns greater than 12.2% have been undertaken, does this mean that cash flows from past investments have an opportunity cost of only 12.2%, because all the company can do with these cash flows is to replace money that has a cost of 12.2%? Yes or No Does this imply that the WACC is the correct reinvestment rate assumption for a project's cash flows? Yes or No