25 Howard Company operates a chain of sandwich shops. The company is considering two possible expansion plans Plan A would open eight smaller shops at a cost of AED 8,500,000. 13 pos Expected annual net cash inflows are AED 1,600,000 for 10 years, with zero residual value at the end of 10 years. Plan B Howard Company would open three larger shops at a cost of AED 8,100,000. This plan is expected to generate net cash inflows of AED 1,000,000 per year for 10 years, which is the estimated useful life of the properties, Estimated residual value for Plan B is AED 990,000. Howard Company uses straight-line depreciation and requires an annual return of 6% Using the information and work out the following to one decimal place: (10 marks) a. The Payback Period" for Project A? (1 mark) b. The Payback Period for Project B? (1 mack) c. The Accounting Rate of Return for Project A? (1 mark) d. The Accounting Rate of Return for Project B? (1 mark) e. The NPV for Project A? (1 mark) f. The NPV for project B? (1 mark) g. The Profitabilty Index**** for Project A? (1 mark) return of 6% Using the information and work out the following to one decimal place: (10 marks) a. The Payback Period for Project A? (1 mark) b. The Payback Period for Project B? (1 mark) c. The Accounting Rate of Return** for Project A? (1 mark) d. The Accounting Rate of Return for Project B? (1 mark) e. The NPV*** for Project A? (1 mark) f. The NPV for project B? (1 mark) g. The Profitabilty Index**** for Project A? (1 mark) h. The Profitability Index for Project B? (1 mark) j. Is Project A an option for your company? Give a reason for your answer. (2 marks) *Payback Amount Invested/Expected annual net cash inflow **ARR Average annual operating income / Average amount invested ***NPV Present Value of net cash inflows - Cost of initial investment ****Profitability Index Present value of net cash inflows / initial investment (PV factor for i-6%, n=10 is 0.558) = For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 14px >