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The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $56 million on a large-scale, integrated plant
The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $56 million on a large-scale, integrated plant that will provide an expected cash flow stream of $9 million per year for 20 years. Plan B calls for the expenditure of $12 million to build a somewhat less efficient, more labor- intensive plant that has an expected cash flow stream of $3.8 million per year for 20 years. The firm's cost of capital is 11%. a. Calculate each project's NPV. 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 delta by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. 0 $ 1-20 $ What is the NPV for this Project A? Round your answer to the nearest dollar. $ What is the IRR for this Project delta? %
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