The MBA intern from a reputed institute is given the task of analyzing two mutually exclusive projects. Proposals at Headquarters of XALCO (An Aluminium company). XALCO was into the manufacturing of aluminum. It had two plants; one at Bilaspur (referred to as Plant B); the other one at Korba (referred to as Plat K) The plant managers of the two plants had submitted proposals related to the renovations (modernizations) of their respected plants. The proposal provides incremental benefits in terms of cash flow projections from the renovation of their respective plants. The logic given was that production efficiency would improve with modernization. However, XALCO could take up only one of the two projects for modernization currently as with improving the efficiency of only one of two projects, it will be able to meet the demand for aluminum.

The cash flow projections of the two proposals are provided in Table I. The Initial outlay for plant B modernization would be Rs 180 Million and for Plant K would be Rs 320 million. The benefit in terms of cash flows for plant B would be Rs 110 Million starting from Year 1 and will grow at a growth rate of 4% till perpetuity and for Plant K it will be Rs 130 million also growing at a rate of 4% till perpetuity from year 1 onwards

Plant	T=0	T=1 till perpetuity with growth rate of g = 4%
Plant B	- 180.00	110.00
Plant K	- 320.00	130.00
*All Values in millions

The cost of capital was not known. The main task of the intern was to find out the cost of capital for which XALCO would be indifferent between choosing any of the projects. What is the cross-over rate and what should the MBA intern suggest regarding investment decisions?

Provide the overall solution with which projects to choose and why?