Question: 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%.
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 %
Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant.
Year Project ? Cash Flows
0 $
1-20 $
What is the NPV for this Project ?? Round your answer to the nearest dollar.