(Payback period and NPV calculations) Plato Energy is an oil and gas exploration and development company located in Farmington, New company drills shallow wells in hopes of finding significant oil and gas deposits. The firm is considering two different drilling opportunities that have very different production potentials. The first is in the Barnett Shale region of contral Texas and the other is in the Gulf Coast. The Barnott Shale project requires a much larger initial investment but provides cash flows ( successful) over a much longer period of time than the Gulf Coast opportunity. In addition, the longer life of the Barnett Shale project also results in additional expenditures in year 3 of the project to enhance production throughout the project's 10-year expected life. This expenditure involves pumping other water or Co, down into the wells in order to increase the flow of oil and gas from the structure. The expected cash flows for the two projects are as follows: a. What is the payback period for each of the two projects? b. Based on the payback periods which of the two projects appears to be the best alternativo? What are the limitations of tho payback period ranking? That is, what does the payback penod not consider that is important in determining the value creation potential of these two projects? c. ll Plato's management usos a discount rate of 20.5 percent to evaluate the prosent values of its onergy investment projects, what is the NPV of the two proposed investments? d. What is your ostimate of the value that will be created for Plato by the acceptance of each of these two investments? a. Given the cash flow Information in the table, the payback period of the Barnett Shale project is yours. (Round to mwo decimal places) 1 Data table es je th ec ce & AWNO Year Barnett Shale Gulf Coast $(5,400,000) $(1,100,000) 1 2,160,000 850,000 2 2,160,000 850,000 3 (1,080,000) 350,000 4 2,160,000 130,000 5 1,960,000 6 1,960,000 7 1,960,000 8 800,000 9 550,000 10 120,000 (Click on the icon in order to copy its contents into a spreadsheet.) Itt Print Done