Question Help Payback period and NPV calculation) Po Energy is an ol and gas exploration and development company located in Farmington, New Mexico. The company is show well in hopes of finding into und des The form is considering two different drilling opportunities that have very different production potential. The first is in the Bemelt Shale region of controles and the other is in the Comt. The Beatles a much larger in investment but provides cash flow of success) over a much longer period of time than the Quill Court opportunity. In addition, the longer life of the Boat Shale projectors in additional expenditures in your 3 of the project to chance production throughout the projects to your expected life. This expenditure Ines pumping other water , down to the walls in order to increase the fow of oil and gas from the trudure. The expected cash fows for the promise 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 alternative? What are the intations of the poytack period torking? That is what does the payback period not consider that is important in termining the value creation potential of these two projects? c. Plato's management ses a discount rate of 20.8 percent to evaluate the present values of its energy investment projects, what is the NPV of the two proposed interdu? d. What is your estimate of the value that will be created for Plato by the acceptance of each of these two investments? . Given the cash flow information in the table, the payback period of the Bamat Shale project is yours. Round to two decimal places) DA, New Mexico. The company drills shalow wells in hopes of finding signif Woon potentials. The first is in the Bamett Shale region of contral Texas and the other is in the Gulf Coast. The Barnett Shalo projo 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 -year expected life. This cocpenditure involves pumping either water or CO, down into the wells in order to increase the flow of oil and gas from the structure. The expecte Data Table of the two projects? ch of the two projects appears to be ojects? unt rate of 20.8 percent to evaluate hat will be created for Plato by the ad bs the payback period not consider that tments? me table, the payback period of the B Year 0 1 2 3 4 5 6 7 8 9 10 Barnett Shalo $(4,500,000) 1,800,000 1,800,000 (900,000) 1,800,000 1,500,000 1,500,000 1,500,000 800,000 450,000 120,000 Gulf Coast $(1,200,000) 900,000 900,000 375,000 150,000 Print Done and then click Check Answer. Clear All MacBook Air