AFTER CLASS PRACTICE 9-1 (2 HW) Barden Restaurant Group operates a chain of restaurants. The company is considering two alternative expansion plans, either opening up 8 smaller restaurants at a cost of $7,740,000 (Plan A) or opening 3 larger shops at a cost of $6,680,000 (Plan B). Each plan has an expected life of 9 years. The working capital would be released at the end for use elsewhere. Other information for the two plans appear below:

AFTER CLASS PRACTICE 9-1 (2 HW) Barden Restaurant Group operates a chain of restaurants. The company is considering two alternative expansion plans, either opening up 8 smaller restaurants at a cost of $7,740,000 (Plan A) or opening 3 larger shops at a cost of $6,680,000 (Plan B). Each plan has an expected life of 9 years. The working capital would be released at the end for use elsewhere. Other information for the two plans appear below: Plan A Plan B Annual cash revenue $4,000,000 $3,500,000 Annual cash expenses 2,450,000 2,350,000 Working capital needed at start up 600,000 500,000 Residual value in 9 years 0 1,275,000 Barden requires a 10% rate of return and uses straight line depreciation. Round answers to the nearest dollar. 1. Calculate the NPV of each plan. Round cash to the nearest dollar. 2. Calculate the profitability index for each plan. 3. Calculate the IRR for each. Ignore the salvage value on new assets. 4. Calculate the payback for each plan. Barden desires a payback of 6 years or less. 9-11