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Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $44 million on a large-scale,
Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $44 million on a large-scale, integrated plant that will provide an expected cash flow stream of $6 million per year for 20 years. Plan B calls for the expenditure of $14 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $2.7 million per year for 20 years. The firm's cost of capital is 9%. 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. Project A: % Project B: % b. Set up a Project A 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. Year Project A Cash Flows 0 $ 1-20 What is the NPV for this Project A? Do not round intermediate calculations. Round your answer to the nearest dollar. Use minus sign to enter negative value, if any. $ What is the IRR for this project A? Round your answer to two decimal places. %
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