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The Evert Exploration Company is considening two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans cail for

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The Evert Exploration Company is considening two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans cail for the expenditure of $10.5 million to drill development wells. Under Plan A, al the ol will be extracted in 1 year, producing a cash flow at t=1 of $13.5 million; under Plan B, cash flows wal be $2 million per year for 20 years. a. What are the annual incremental cash flows that will be avaliable to Ewert Exploration if it undertakes Plan B rather than Plan A? (Hint: Subtract Plan A's. flows from B's.) Enter your answers in millions. For example, an answer of $1.23 milion should be entered as 1.23 , not 1,230,000. Round your answers to two dedmal places. Use a minus sigh to enter cash outfows, if any. b. If the company accepts Plan A and then invests the extra cash generated at the end of Year 1 , what rate of return (reinvestment rate) would cause the cash flows from reinvestment to equal the cash fows from Plan B? Round your answer to two decimal places

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