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 12.5%.

1. ConstructNPVprofilesforPlansAandB.Roundyouranswerstotwodecimalplaces.Enteryouranswersinmillions.Forexample,ananswerof$10,550,000shouldbeenteredas10.55.

   DiscountRate	NPVPlanA	NPVPlanB
   0%	$million	$million
   5	$million	$million
   10	$million	$million
   12	$million	$million
   15	$million	$million
   17	$million	$million
   20	$million	$million

   Identifyeachproject'sIRR.Roundyouranswerstotwodecimalplaces.
2. ProjectA%
3. ProjectB% Findthecrossoverrate.Roundyouranswertotwodecimalplaces.
4. %