A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million initial outlay on a large- scale integrated plant that would provide expected cash flows of $6.39 million per year for 20 years. Plan B requires a $ 15 million initial outlay to build a somewhat less efficient, more labor - intensive plant with expected cash flows of $3.36 million per year for 20 years. The firm's WACC is 9%. a. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10, 550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: $ million Plan B: $ million Calculate each project's IRR. Round your answers to one decimal place. Plan A: % Plan B: % b. By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number. % c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one decimal place. % d. Is NPV better than IRR for making capital budgeting decisions that add to shareholder value? A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million initial outlay on a large-scale integrated plant that would provide expected cash flows of $6.39 million per year for 20 years. Plan B requires a $15 million initial outlay to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $3.36 million per year for 20 years. The firm's WACC is 9%. a. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: $ 18.33 million million Plan B: $ 15.671 Calculate each project's IRR. Round your answers to one decimal place. Plan A: 15 % Plan B: 21.97 % b. By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number. % c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one decimal place. % d. Is NPV better than IRR for making capital budgeting decisions that add to shareholder value? Yes

Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?

Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?

Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?

Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?

Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?

A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million initial outlay on a large-scale integrated plant that would provide expected cash flows of $6.55 million per year for 20 years. Plan B requires a $13 million Initial outlay to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.91 million per year for 20 years. The firm's WACC is 10%. a. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: Plan B: $ $ million million Calculate each project's IRR. Round your answers to one decimal place. Plan A: Plan B: % % b. By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number. % c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one…

A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million initial outlay on a large-scale integrated plant that would provide expected cash flows of $6.55 million per year for 20 years. Plan B requires a $11 million initial outlay to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.47 million per year for 20 years. The firm's WACC is 11%. a. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: Plan B: $ million million Calculate each project's IRR. Round your answers to one decimal place. Plan A: Plan B: % % b. By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number. % c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one…

A company is considering two mutually exclusive expansion plans. Plan A requires a $39 million initial outlay on a large-scale integrated plant that would provide expected cash flows of $6.23 million per year for 20 years. Plan B requires a $11 million initial outlay to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.47 million per year for 20 years. The firm's WACC is 10%. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A:     $   million Plan B:     $   million Calculate each project's IRR. Round your answers to one decimal place. Plan A:       % Plan B:       % By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number.   % Calculate the crossover rate where the two projects' NPVs are equal. Round…