The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $50 million on a large-scale, integrated plant that will provide an expected cash flow stream of $8 million per year for 20 years. Plan B calls for the expenditure of $15 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.4 million per year for 20 years. The firm's cost of capital is 10%.
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 | % |
NPV of project A = -50+8/(1.10)^1+8/(1.10)^2+8/(1.10)^3+8/(1.10)^4+8/(1.10)^5+8/(1.10)^6+8/(1.10)^7+8/(1.10)^8+8/(1.10)^9+8/(1.10)^10+8/(1.10)^11+8/(1.10)^12+8/(1.10)^13+8/(1.10)^14+8/(1.10)^15+8/(1.10)^16+8/(1.10)^17+8/(1.10)^18+8/(1.10)^19+8/(1.10)^20
=$18.11
NPV of project B = -15+3.4/(1.1)^1+3.4/(1.1)^2+3.4/(1.1)^3+3.4/(1.1)^4+3.4/(1.1)^5+3.4/(1.1)^6+3.4/(1.1)^7+3.4/(1.1)^8+3.4/(1.1)^9+3.4/(1.1)^10+3.4/(1.1)^11+3.4/(1.1)^12+3.4/(1.1)^13+3.4/(1.1)^14+3.4/(1.1)^15+3.4/(1.1)^16+3.4/(1.1)^17+3.4/(1.1)^18+3.4/(1.1)^19+3.4/(1.1)^20
= $13.95
Use function IRR in excel as = IRR(-50,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8,8) = 15.03% is the IRR for A.
Use function IRR in excel as = IRR(-15,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4,3.4) = 22.26% is the IRR for B.
The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditur...
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...
A company is considering two mutually exclusive expansion plans. Plan A requires a $39 million expenditure 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 expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow 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...
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure 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 $13 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.91 million per year for 20 years. The firm's WACC is 11%. Calculate each project's NPV. Enter your answers in millions. For example,...
A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million expenditure 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 expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.47 million per year for 20 years. The firm's WACC is 9%. Calculate each project's NPV. Enter your answers in millions. For example,...
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure 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 $13 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.91 million per year for 20 years. The firm's WACC is 10%. The data has been collected in the Microsoft Excel Online file...
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure 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 expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $3.36 million per year for 20 years. The firm's WACC is 10%. The data has been collected in the Microsoft Excel Online file...
A company is considering two mutually exclusive expansion plans. Plan A requires a $39 million expenditure 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 expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.47 million per year for 20 years. The firm's WACC is 11%. The data has been collected in the Microsoft Excel Online file...
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure 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 $12 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.69 million per year for 20 years. The firm's WACC is 11%. The data has been collected in the Microsoft Excel Online file...
2. A company is considering two mutually exclusive expansion projects. Plan A requires a 21 million expenditure on a large scale integrated plant that would provide expected cash flows of $6.40 million per year for 6 years. Plan B requires a $7 million expenditure to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.72 million per year for 6 years. The firm's WACC is 10%. (Timeline required) a. Calculate each project's NPV and IRR. b....
A company is considering two mutually exclusive expansion projects. Plan A requires a 21 million expenditure on a large scale integrated plant that would provide expected cash flows of $6.40 million per year for 6 years. Plan B requires a $7 million expenditure to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.72 million per year for 6 years. The firm’s WACC is 10%. (Timeline required) a. Calculate each project’s NPV and IRR. b. Calculate...