Question
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,
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%.
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: %
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.
Year | Project Cash Flows |
0 | $ |
1-20 | $ |
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.
%
Select the correct graph for the NPV profiles for Plan A, Plan B, and Project .
The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 9 .
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