P26-7B TechNo operates a chain of electronics stores. The company is considering two pos- sible expansion plans. Plan A would open eight smaller stores at a cost of $6,450,000. Expected annual net cash inflows are $860,000, with zero residual value at the end of 20 years. Under plan B. TechNo would open three larger stores at a cost of $6,420,000. This plan is expected to generate net cash inflows of $600,000 per year for 20 years, the estimated life of the store properties. Estimated residual value is $3,000,000. TechNo uses straight-line depreciation and requires an annual return of 8%. Required 1. Compute the payback period, the accounting rate of return, and the net present value of these two plans. What are the strengths and weaknesses of these capital budgeting models? 2. Which expansion plan should TechNo choose? Why? 3. Estimate plan A's internal rate of return (IRR). How does the IRR compare with the com- pany's required rate of return?