Caclulate the NPV (net present value) of each plan Begin by calculating the NPV of Plan A. (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 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 Net present value Payback method ARR Profitability index 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 model 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 altemative investments in present value terms and it also accounts for differences in the nvestments inilial cost it has none of the \begin{tabular}{|c|c|c|c|c|c|} \hline Yan B. & & NetCashInflow & AnnuityPVFactor(i=9%,n=10) & PVFactor(i=9%,n=10) & PresentValue \\ \hline 1=10 & PresentvalueofannuityPresentvalueofresidualvalue & & & & \\ \hline & Total PV of cash inflows & & & & \\ \hline 0 & Initial Investment & & & & \\ \hline & Net present value of Plan B & & & & \\ \hline \end{tabular} Calculate the profitability index of these two plans (Round to two decimal places XX ) More info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,450,000. Expected annual net cash inflows are $1,500,000 for 10 years, with zero residual value at the end of 10 years Under Plan B, Lapos Company would open three larger shops at a cost of $8,250,000. This plan is expected to generate net cash inflows of $1,070,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $990,000. Lapos Company uses straight-line depreciation and requires an annual return of 9% Calculate the ARR (accounting rate of return) for both plans: (Round your answers to the nearest tenth percent, X% ) Gaclulate the NPV (net present value) of each plan Begin by calculating the NPV of Plan A. (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 places, XX. Use parentheses or a minus sign for a negative net present value ) Requirement 3. Which expansion plan should Lapos Company choose? Why? Lapos Company should invest in PlanA because it has a shorter payback period, a higher ARRi a higher net present value, and a higher 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 12%14% This rate exceeds the company's hurdle rate of 9%. Present Value of Ordinary Annuity of $1 \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline Periods & 1% & 2% & 3% & 4% & 5% & 6% & 7% & 8% & 9% & 10% & 12% & 14% & 15% & 16% & 18% & 20% \\ \hline Period 1 & 0.990 & 0.980 & 0.971 & 62 & 0.952 & 0.943 & 0.935 & 0.926 & 2917 & 0.909 & 0.893 & 0.877 & 0.870 & 0.862 & 0.347 & 0.833 \\ \hline riod 2 & 70 & 1.942 & 43 & 386 & 1859 & 1.833 & 808 & 783 & 759 & 736 & 690 & 647 & 526 & 605 & 566 & 528 \\ \hline riod 3 & & 2. & 2829 & 2.775 & 2723 & 2.673 & 2.624 & 577 & 531 & 2487 & 402 & 322. & 283 & 246 & 174 & \\ \hline od4 & & 3808 & 3. & 3.630 & 3.546 & 3.465 & 387 & 312 & 240 & 170 & 337 & 14 & 855 & 98 & 90 & \\ \hline riod 5 & & & 4 & 4. & & 4 & 10 & 3.993 & an: & 791 & 05 & 3 & 352 & 2 & 127 & \\ \hline - & 5795 & 1 & 5.41 & 5242 & 5.076 & & & 4020 & 80. & . & & 0.000 & 3.784 & 3685 & 498 & 326 \\ \hline riod7 & 6728 & 6.472 & 6.230 & 6002 & 5786 & 5.582 & 5.389 & 5206 & 5.033 & 4.868 & 4.564 & 4.288 & 4160 & 039 & 812 & 605 \\ \hline riod 8 & 7652 & 7325 & 7.020 & 6.733 & 6.463 & 6.210 & 5971 & 5747 & 5535 & 5.335 & 4.968 & 4.639 & 4.487 & 4.344 & 4.078 & 837 \\ \hline riod 9 & 8.566 & 8.162 & 7786 & 7435 & 7.108 & 6.802 & 6.515 & 6247 & 5.995 & 5.759 & 5.328 & 4946 & 4.772 & 4.607 & 4.303 & 0.031 \\ \hline eriod 10 & 9.471 & 8.983 & 8.530 & 8111 & 7722 & 7360 & 7.024 & 6710 & 6418 & 6145 & 5.650 & 5.216 & 5.019 & 4.833 & 4.494 & 4,192 \\ \hline eriod 11 & 36 & 9787 & 9.2 & 8 & 8. & 7. & 7499 & x2 & 6.805 & 6.495 & 5938 & 5453 & 5234 & 29 & & \\ \hline riod 12 & 11.255 & 10.575 & 9.954 & 9.385 & 8.863 & 8.384 & 7943 & 75 & 161 & 6.8 & 6.194 & 660 & 21 & 7 & 793 & 439 \\ \hline Period 13 & 12.134 & 11.348 & 10.635 & 9.986 & 9.394 & 8853 & 8358 & 7.904 & 7487 & 7103 & 6424 & 5.842 & 5.583 & 342 & 940 & 1533 \\ \hline Period 14 & 13.004 & 12106 & 11.296 & 10.563 & 9.80 & 9.29 & 8745 & 8.2 & 77 & 7.367 & 66 & 6.002 & 5.724 & 88 & 5008 & \\ \hline Period 15 & 10 & 1 & 11.938 & 11118 & 10380 & 9.712 & 9.108 & 8.559 & 8.06 & 7.606 & 681 & 6.142 & 5.847 & 5.575 & 5.092 & 4.675 \\ \hline & & 578 & 56 & 11.652 & 10 & 10 & 9447 & 8.85 & 8.313 & 7824 & 974 & 6265 & 5954 & 669 & 162 & 730 \\ \hline 117 & 562 & 292 & 13166 & 121 & 11.274 & 10.4 & & 9.122 & 8.544 & 8.022 & 7.120 & 6.373 & 6.047 & 5749 & 5222 & 4.775 \\ \hline 118 & 16398 & 992 & 54 & 12.659 & 11.690 & 10.8 & 10.059 & 9372 & 8.756 & 8201 & 7.250 & 6.467 & 6128 & 5.818 & 5.273 & 4.812 \\ \hline Per & 17226 & & 24 & 13 & 120 & 11.458 & 10.336 & 9.604 & 8950 & 8.365 & 7366 & 6.550 & 6.198 & 5877 & 5.316 & 4.844 \\ \hline Period 20 & 18.046 & 16.351 & 14.877 & 13590 & 1246 & 11470 & 40501 & 0 & 9. & 0 & 7.469 & 6.623 & 6.259 & 5.929 & 5353 & 4.870 \\ \hline 121 & 857 & 011 & 15415 & 029 & 12.821 & 14761 & & 0 & 28 & 649 & 7.562 & 6.687 & 6312 & 5.973 & 5.384 & 4.891 \\ \hline \end{tabular} Lapos Company operates a chain of sandwich shops. (Click the icon to view additional information.) Read the requirements: (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table) fClick the icon to view Future Value of $1 table) (Click the icon to view Future Value of Ordinary Amuty 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) Calculate the ARR (accounting rate of return) for both plans (Round your answers to the nearest tenth percent, XX% ) x%