A Reference . X Future Value of Ordinary Annuity of $1 1% 9% 14% 2% 3% 4% 5% 6% 7% 8% 10% 12% 15% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.010 2.020 2030 2.040 2.050 2060 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.030 3.060 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 4.184 | 4.246 4.310 4.375 4.440 4.5064.573 4.641 | 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5.637 5.7515.867 5.985 6.105 | 6.353 6.610 6.742 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.336 | 7.523 7.716 8.115 8.536 8.754 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 9.487 10.09 10.73 11.07 8.286 8.583 8.892 | 9.214 9.549 9.897 10.260 10.64 11.03 11.44 12.30 13.23 13.73 9.369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.1915.94 17.55 | 19.34 20.30 11.57 12.17 12.81 13.49 14.21 14.97 12.68 | 13.41 14.19 15.03 15.92 16.87 13.81 14.68 | 15.62 16.63 17.71 18.88 14.95 | 15.97 17.0918.29 19.60 21.02 16.10 17.29 18.60 20.02 21.58 23 28 15.78 16.65 17.56 18.53 20.65 23.04 24.35 17.8918.98 20.14 21.3824.13 27.27 | 29.00 20.14 21.50 22.95 24.52 28.03 32.09 34.35 22.55 24.21 26.02 27.98 32.39 37.58 40.50 25.13 27.15 29.36 31.77 37.28 43.84 47.58 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 Period 40 Period 50 17.2618.64 20.16 21.82 23.66 25.67 18.43 20.01 21.76 23.70 25.84 28.21 19.61 21.41 23.41 25.65 28.13 30.91 20.81 22.84 25.12 27.67 30.54 33.76 22.02 24.30 26.87 29.78 33.07 36.79 27.89 30.32 | 33.00 35.95 42.75 50.98 55.72 30.84 33.75 36.97 40.54 48.88 59.12 65.08 34.00 37.4541.30 45.60 55.75 68.39 75.84 37.38 41.45 46.02 51.16 63.44 | 78.97 | 88.21 41.00 45.76 51.16 57.28 72.05 91.02 102.4 23.24 25.7828.68 31.97 35.72 24.47 27.30 30.5434.25 38.51 25.72 28.85 32.45 36.62 41.43 26.97 30.42 34 43 39.08 44.50 28.24 32.03 36.46 | 41.65 47.73 39.99 43.39 47.00 50.82 54.86 44.87 50.42 56.76 64.00 81.70 104.8 118.8 49.01 55.46 62.87 71.40 92.50 120.4 137.6 53.4460.89 69.53 79.54 104.6 138.3 159.3 58.18 66.76 76.79 88.50 118.2 158.7 184.2 63.25 73.11 84.70 98.35133.3 181.9 212.8 29.53 33.67 38.55 44.31 51.11 59.16 30.82 35.34 40.71 47.08 54.67 63.71 32.13 37.05 42.93 49.97 58.40 68.53 33.45 38.79 45.22 52.97 62.32 73.64 34.78 40.57 47.58 56.08 66.44 79.06 48.89 60.40 75.40 95.03 120.8 154.8 68.68 79.95 93.32 109.2 150.3 208.3 245.7 74.48 87.35 102.7 121.1 169.4 238.5 283.6 80.70 95.34 113.0 134.2 190.7 272.9 327.1 87.35 104.0 | 124.1 148.6 | 214.6 312.1 | 377.2 94.46 113.3 136.3 164.5 241.3 356.8 434.7 199.6 259.1 337.9 4426 767.1 1,342 1,779 64.46 84.58 112.8 152.7 209.3 290.3 406.5 573.8 815.1 1,164 2,400 4,995 7,218 Print Done Reference - Present Value of Ordinary Annuity of $1 16% 18% 20% 0.862 1.605 2.246 0.847 0.833 1.566 1.528 2.174 2.106 2.690 2.589 3.127 2.991 2.798 3.274 3.685 4.039 4 344 3.498 3.326 3.812 3.605 4.078 3.837 4.303 4.031 4.494 4.192 4.607 4.833 4.656 4.327 4.439 5.029 5.197 5.342 5.468 5.575 4.793 4.910 4.533 5.008 4.611 5.092 4.675 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 Period 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 Period 3 2.941 2.884 2.829 2.775 2.723 2.673 2624 2.577 2.531 2.487 2.402 2.322 2.283 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 | 2.855 Period 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 Period 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.4864.355 4 111 3.889 3.784 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.160 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4.639 4.487 Period 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.9955.759 5.328 4.946 4.772 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.650 5.216 5,019 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.5367.161 6.814 6.194 5.660 5.421 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.842 5.583 Period 14 13.004 12.106 | 11.296 | 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.724 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8,061 7.606 6.811 6.142 5.847 Period 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 6.265 5.954 Period 17 15.562 14.292 | 13.166 12. 166 11.274 10.4771 9.763 9.122 8.544 8.022 7.120 6.373 6.047 Period 18 16.398 14.992 | 13.754 12.659 11.690 10.828 10.059 9.372 8.756 3.201 7.250 6.467 | 6.128 Period 19 17.226 15.678 | 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 6.198 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.469 6.623 6.259 Period 21 18.857 | 17.011 15.415 14.029 12.821 11.764 10.836 10.0179.292 8.649 7.562 6.687 6.312 Period 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.2019.442 8.772 7.645 6.743 6.359 Period 23 20.456 18.292 | 16.444 14.857 13.489 12 303 11.272 10.371 9.580 8.883 7.718 6.792 6.399 Period 24 21.24318.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985 7.7846.835 6.434 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 7.843 6.873 6.464 Period 26 22.795 20.121 17.877 15.983 14.375 13.003 11.826 10.8109.929 9.161 7.896 6.906 6.491 Period 27 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027 9.237 7.943 6.935 6.514 Period 28 24.316 21.281 18.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 7.984 6.961 6.534 Period 29 25.066 21.844 19.188 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.022 6.983 6.551 Period 30 25.808 22 396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.055 7.003 6.566 Period 40 32.835 27 355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.244 7.105 6.642 Period 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.962 9.915 8.304 7.133 6.661 5.669 5.749 5.818 5.162 4.730 5.222 4.775 5.273 4.812 5.316 4.844 5.353 4.870 5.877 5.929 5.973 6.011 6.044 5.384 4.891 5.410 4.909 5.432 4.925 5.451 4.937 5.467 4.948 6.073 6.097 6.118 6.136 6.152 6.166 6.177 5.480 4.956 5.492 4.964 5.502 4.970 5.510 4.975 5.517 4.979 6.233 5.548 4.997 6.246 5.554 4.999 Print Done i Reference - X Present Value of $1 7% 0.935 0.873 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.7180.694 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.681 0.650 0.621 0.567 0.519 0.497 0.476 | 0.437 0.402 0.816 0.763 0.713 0.666 0.630 0.583 0.623 0.582 0.544 0.540 0.500 0.596 0.564 0.507 0.456 0.547 0.513 0.452 0.400 0.502 0.467 0.404 0.351 0.460 0.424 0.361 0.308 0.422 0.386 0.322 0.270 0.432 0.410 0.370 0.335 0.376 0.354 0.3140.279 0.327 0.305 0.2660.233 0.284 0.263 0.225 0.194 0.247 0.227 0.191 0.162 0.508 0.463 0.475 0.429 0.444 0.397 0.368 0.415 0.388 0.340 0.362 0.315 Periods 1% 2% 3% 4% 5% 6% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 Period 11 0.896 0.804 0.722 0.650 0.585 0.527 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 Period 16 0.853 0.7280.623 0.534 0.458 0.394 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 Period 20 0.820 0.673 0.554 0.456 0.377 0.312 Period 21 0.811 0.660 0.538 0.439 0.359 0.294 Period 22 0.803 0.647 0.522 0.422 0.342 0.278 Period 23 0.795 0.634 0.507 0.406 0.326 0.262 Period 24 0.788 0.622 0.492 0.390 0.310 0.247 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 Period 26 0.772 0.598 0.464 0.361 0.281 0.220 Period 27 0.764 0.586 0.450 0.347 0.268 0.207 Period 28 0.757 0.574 0.437 0.333 0.255 0.196 Period 29 0.749 0.563 0.424 0.321 0.243 0.185 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.339 0.317 0.296 0.292 0.270 0.250 0.277 0.258 0.232 0.215 0.242 0.199 0.226 0.184 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.326 0.290 | 0.229 0.182 0.163 0.145 0.116 0.093 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.252 0.218 0.163 0.123 0.107 0.093 0.071 0.054 0.231 0.198 0.146 0.108 0.093 0.080 | 0.060 0.045 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 0.194 0.164 0.116 0.083 0.070 0.060 | 0.043 0.031 0.178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 0.1640.135 0.093 0.064 0.053 0.044 0.031 0.022 0.150 0.123 0.083 0.056 0.046 0.038 0.026 0.018 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 0.126 0.102 0.066 0.043 0.035 0.028 0.019 0.013 0.116 0.092 0.059 0.038 0.030 0.024 0.0160.010 0.106 0.084 0.053 0.033 0.026 0.021 0.014 0.009 0.098 0.076 0.047 0.029 0.023 0.018 | 0.0110.007 0.090 0.069 0.042 0.026 0.020 0.0160.010 0.006 0.082 0.063 0.037 0.022 0.017 0.014 0.008 0.005 0.075 0.057 0.033 0.020 0.015 0.012 0.007 0.004 0.032 0.022 0.011 0.005 0.004 0.003 0.001 0.001 0.013 0.009 0.003 0.001 0.001 0.001 0.211 0.170 0.158 0.197 0.184 0.146 0.172 0.161 0.135 0.125 0.116 0.150 0.141 0.107 0.099 0.131 0.067 0.046 0.034 0.021 Print Done - X Reference Future Value of $1 1% 2% 3% 4% 5% 6% 7% 1.010 1.020 1.020 1.040 1.061 1.082 1.104 1.030 1.040 1.050 1.060 1.070 1.061 1.0821.103 | 1.124 1.145 1.093 1.125 1.158 1.191 1.225 1.126 1.170 1.216 1.2621.311 1.159 1.217 1.276 | 1.338 1.403 8% 9% 10% 1.080 1.090 1.100 1.166 1.1881.210 1.260 1.295 | 1.331 1.360 1.4121.464 1.469 1.539 1.611 1.030 12% 14% 15% 1.120 1.140 1.150 1.254 1.300 1.323 1.405 1.482 1.521 1.574 1.689 1.749 1.762 1.925 2.011 1.041 1.051 1.974 2.195 2.313 1.062 1.072 1.126 1.149 2.211 2.502 2.660 1.083 1.172 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.2301.316 1.407 1.504 1.606 1.714 1.828 1.949 1.267 1.369 1.4771.594 1.718 1.851 1.993 2.144 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 1.344 1.480 1.629 1.791 1.967 2.159 2.3672594 2.476 2.853 3.059 1.195 2.773 3.252 3.518 1.094 1.105 1.219 3.106 3.707 4.046 1.243 1.116 1.127 1.138 1.149 1.268 1.294 1.384 1.539 1.710 1.898 2.105 2.332 2.580 2.853 3.479 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.896 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 4.363 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 1.558 1.801 2.079 2.3972.759 3.172 3.642 4.177 5.474 4.226 4.652 4.818 5.350 5.492 6.153 6.261 7.076 7.1388.137 1.319 1.161 1.346 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 Period 40 Period 50 1.173 1.184 1.373 1.400 1.196 1.428 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.595 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.054 1.702 2.0262.407 2.854 3.380 3.996 4.717 5.560 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 1.806 2.191 2.653 3.2073.870 4.661 5.6046.727 6.130 8.1379.358 6.866 9.276 10.76 7.690 10.58 12.38 8.613 12.06 14.23 9.646 13.74 | 16:37 1.457 1.208 1.220 1.486 10.80 15.67 18.82 12.10 17.86 21.64 13.55 20.36 24.89 15.18 23.21 28.63 17.00 26.46 | 32.92 1.232 1.516 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 1.245 1.546 1.916 2370 2.925 3.604 4.430 5.437 6.659 8.140 1.257 1.577 1.974 2.465 3.072 3.820 4.741 5.871 | 7.258 8.954 1.270 1.608 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 1.282 1.641 2.094 2666 3.386 4.292 5.427 6.848 8.623 10.83 1.295 1.673 2.157 2772 3.556 4.549 5.8077.396 9.399 11.92 1.308 1.707 2.221 2.883 3.733 4.822 6.214 7.988 10.25 13.11 1.321 1.741 2.288 2.999 3.920 5.112 6.649 8.627 11.17 14.42 1.335 1.776 2.357 3.119 4.116 5.418 7.114 9.317 12.17 15.86 1.348 1.811 2.427 3.243 4.3225.743 7.612 10.06 13.27 17.45 1.489 2.208 3.262 4.801 7.040 10.29 14.97 21.72 31.41 45 26 19.04 30.1737.86 21.32 34.39 43.54 23.88 39.20 50.07 26.75 44.69 57.58 29.96 50.95 | 66.21 93.05 188.9 267.9 1.645 2.692 4.384 7.107 11.47 18.42 29.46 46.90 74.36 117,4 299.0 700.21,084 Print Done 0 - X More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,425,000. Expected annual net cash inflows are $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Limes Company would open three larger shops at a cost of $8,250,000. This plan is expected to generate net cash inflows of $1,000,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan Bis 5990,000. Limes Company uses straight-line depreciation and requires an annual return of 7%. Print Done - X Requirements 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. 2. What are the strengths and weaknesses of these capital budgeting methods? 3. Which expansion plan should Limes Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done This Question: 8 pts 22 of 22 (0 complete) This Test: 75 pts (Click the icon to view Present Value of $1 table.) Limes Company operates a chain of sandwich shops. (Click the icon to view additional information.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. Calculate the payback for both plans. (Round your answers to one decimal place, X.X.) = Payback Plan A years Plan B years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) ARR Plan A % Plan B % Caciulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A (Complete all answer boxes. Enter a "O" for any zero balances or amounts that do no apply to the plan. Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Annuity PV Factor PV Factor Present Years Inflow (i=7%, n=10) (i=7%, n=10) Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan A Calculate the NPV of Plan B. (Complete all answer boxes. Enter a "0" for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal X.XXX. Use parentheses or a minus sign for a negative net present value.) Plan B: Net Cash Annuity PV Factor PV Factor Present Years Inflow (i=7%, n=10) (i=7%, n=10) Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan B Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) = Profitability index Plan A Plan B Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Match the term with the strengths and weaknesses listed for each of the four capital budgeting models. Capital Budgeting Method Strengths/Weaknesses of Capital Budgeting Method Is based on cash flows, can be used to assess profitability, and takes into account the time value of money. It has none of the weaknesses of the other models. Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Can be used to assess profitability, but it ignores the time value of money. It allows us to compare alternative investments in present value terms and it also accounts for differences in the investments initial cost. It has none of the weaknesses of the other models. Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Company should invest in because it has a payback period, a ARR, a net present value, and a profitability index. Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? The IRR (internal rate of return) of Plan A is between This rate the company's hurdle rate of 7%