Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $47 million on a large-scale, integrated plant that will provide an expected cash flow stream of $7 million per year for 20 years. Plan B calls for the expenditure of $13 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.1 million per year for 20 years. The firm's cost of capital is 12%. a. Calculate each project's NPV. Do not round intermediate calculations. Round your answers to the nearest dollar. Project A: $ Project B: $ Calculate each project's IRR. Round your answers to two decimal places. ProjectA:ProjectB:%% 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. Round your answers to the nearest dollar. Use a minus sign to enter cash outflows, if any. What is the NPV for this Project ? Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter negative value, if any. What is the IRR for this Project ? Round your answer to two decimal places. c. Select the correct graph for the NPV profiles for Plan A, Plan B, and Project . A C The correct graph is Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $47 million on a large-scale, integrated plant that will provide an expected cash flow stream of $7 million per year for 20 years. Plan B calls for the expenditure of $13 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.1 million per year for 20 years. The firm's cost of capital is 12%. a. Calculate each project's NPV. Do not round intermediate calculations. Round your answers to the nearest dollar. Project A: $ Project B: $ Calculate each project's IRR. Round your answers to two decimal places. ProjectA:ProjectB:%% 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. Round your answers to the nearest dollar. Use a minus sign to enter cash outflows, if any. What is the NPV for this Project ? Do not round intermediate calculations. Round your answer to the nearest dollar. Use a minus sign to enter negative value, if any. What is the IRR for this Project ? Round your answer to two decimal places. c. Select the correct graph for the NPV profiles for Plan A, Plan B, and Project . A C The correct graph is
