Question
Problem 10-15 Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $56 million on
Problem 10-15 Scale Differences
The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $56 million on a large-scale, integrated plant that will provide an expected cash flow stream of $9 million per year for 20 years. Plan B calls for the expenditure of $12 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.8 million per year for 20 years. The firm's cost of capital is 11%.
Calculate each project's NPV. Round your answers to the nearest dollar.
Project A | $ |
Project B | $ |
Calculate each project's IRR. Round your answers to two decimal places.
Project A | % |
Project B | % |
Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant.
Year | Project Cash Flows |
0 | $ |
1-20 | $ |
What is the NPV for this Project ? Round your answer to the nearest dollar.
$
What is the IRR for this Project ? Round your answer to two decimal places. %
Graph the NPV profiles for Plan A, Plan B, and Project .
Select the correct graph.
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