Question

The Pinkerton Publishing Company is considering two independent 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 $9 million per year for 8 years. Plan B calls for the expenditure of $28 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $ 5 million per year for 8 years. The firm’s cost of capital is 10%.Calculate each project’s NPV and IRR, and indicate the correct accept–reject decision for each methods

Answer 1

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