Comprehensive Problem Set Lolas Company operates a chain of sandwich shops. (Click the icon to view additional information.) Read the requirements. Question 8, PM11-31A (similar to) HW Score: 75.27%, 75.27 of 100 points Part 2 of 9 Save Calculate the payback for both plans. (Kouna your answers to one decimal place, X.X.) Points: 3.77 of 25 (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Plan A Plan B $ $ Amount invested 8,600,000 8,100,000 $ Expected annual net cash inflow Payback 5.4 years 7.6 years 1,600,000 1,070,000 Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Present value of net cash inflows Plan A 8600000 Amount invested 10 = ARR % Help me solve this Demodocs example Get more help e to search O JUL S M O S Clear all Check answer More info tn E no The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,600,000. Expected annual net cash inflows are $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lolas Company would open three larger shops at a cost of $8,100,000. 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 $980,000. Lolas Company uses straight-line depreciation and requires an annual return of 8%. Ling valu Print Done Requirements 000 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 Lolas Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done 10 % Reference 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 Present Value of $1 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.547 0.513 0.452 0.400 0.376 0.354 0.314 0.279 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 0.162 Period 11 0.896 0.804 0.722 0.650 0.585 Period 12 0.887 0.788 0.701 0.625 0.557 Period 13 0.879 0.773 0.681 0.601 0.530 0.527 0.475 0.497 0.444 0.469 0.415 0.429 0.388 0.350 0.287 0.397 0.356 0.319 0.257 0.368 0.326 0.290 0.229 0.237 0.215 0.195 0.162 0.135 0.208 0.187 0.168 0.137 0.112 0.182 0.163 0.145 0.116 0.093 Print Done Present Value of Ordinary Annuity of $1 Periods Period 1 1% 2% 3% 4% 0.990 0.980 0.971 0.962 Period 2 1.970 1.942 1.913 1.886 Period 3 2.941 2.884 2.829 2.775 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 Period 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 5% 6% 7% 8% 9% 10% 12% 14% 15% 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 1.566 1.528 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.283 2.246 3.312 3.240 3.170 3.037 2.914 2.855 2.798 2.690 2.589 2.174 2.106 3.993 3.890 3.791 3.605 3.433 3.352 3.274 3.127 2.991 16% 18% 0.862 0.847 0.833 20% 1.605 Period 6 5.795 5.601 5.417 5.242 Period 7 6.728 6.472 6.230 6.002 Period 8 7.652 7.325 7.020 5.076 4.917 4.767 5.786 5.582 5.389 6.733 6.463 6.210 5.971 Period 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 4.623 4.486 4.355 4.111 3.889 3.784 3.685 3.498 3.326 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 5.747 5.535 5.335 4.968 4.639 4.487 4.344 4.078 3.837 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.303 4.031 6.710 6.418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 Period 11 Period 12 11.255 10.575 9.954 Period 13 12.134 11.348 10.635 10.368 9.787 9.253 8.760 8.306 7.887 7.499 9.385 8.863 8.384 7.943 9.986 9.394 8.853 8.358 7.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 7.536 7.161 6.814 7.904 7.487 7.103 6.424 5.842 5.583 6.194 5.660 5.421 5.197 4.793 4.439 5.342 4.910 4.533 Print Done Reference Future Value of $1 Periods 1% 2% 3% 4% Period 1 1.010 1.020 1.030 Period 2 1.020 1.040 1.061 Period 3 1.030 1.061 1.093 Period 1.041 1.082 1.126 Period 5 1.051 1.104 1.159 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.040 1.050 1.060 1.070 1.080 1.090 1.100 1.120 1.140 1.150 1.082 1.103 1.124 1.145 1466 1.188 1.210 1.254 1.300 1.323 1.125 1.158 1.191 1.225 1260 1.295 1.331 1.405 1.482 1.521 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.574 1.689 1.749 1.217 1.276 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 Period 6 1.062 1.126 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.974 2.195 2.313 Period 7 1.072 1.149 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.949 2.211 2.502 2.660 Period 8 1.083 1.172 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2.144 2.476 2.853 3.059 Period 9 1.094 1.195 Period 10 1.105 1.305 1.219 1.344 1.480 1.629 1.791 1.967 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.773 3.252 3.518 2.159 2.367 2.594 3.106 3.707 4.046 Period 11 1.116 1.243 1.384 1.539 1.710 1.898 2.105 2.332 2.580 2.853 3.479 4.226 4.652 Period 12 1.127 1.268 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.896 4.818 5.350 Period 13 1.138 1.294 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 4.363 5.492 6.153 Print Done Periods 1% 2% 3% 4% 5% 6% Period 1 1.000 1.000 1.000 1.000 1.000 1.000 Period 2 2.010 2.020 2.030 2.040 Period 3 3.030 3.060 3.091 3.122 Period 4 4.060 4.122 4.184 4.246 Period 5 5.101 5.204 5.309 5.416 5.526 2.050 3.153 2.060 3.184 4.310 4.375 5.637 Future Value of Ordinary Annuity of $1 7% 8% 9% 10% 12% 14% 15% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.215 3.246 3.278 3.310 3.374 3.440 3.473 4.440 4.556 4.573 4.641 4.779 4.921 4.993 5.751 5.867 5.985 6.105 6.353 6.610 6.742 Period 6 Period 7 Period 8 Period 9 6.152 6.308 6.468 6.633 6.802 7.214 7.434 7.662 7.898 8.142 8.286 8.583 8.892 9.214 9.549 9.369 9.755 10.16 10.58 6.975 8.394 9.897 11.03 11.49 Period 10 10.46 10.95 11.46 12.01 12.58 13.18 7.153 7.336 7.523 7.716 8.115 8.536 8.754 8.654 8.923 9.200 9.487 10.09 10.73 11.07 10.260 10.64 11.03 11.44 12.30 13.23 13.73 11.98 12.49 13.02 13.58 14.78 16.09 16.79 13.82 14.49 15.19 15.94 17.55 19.34 20.30 Period 11 11.57 12.17 12.81 13.49 14.21 14.97 15.78 16.65 17.56 18.53 20.65 23.04 24.35 Period 12 12.68 13.41 14.19 15.03 Period 13 13.81 14.68 15.62 16.63 15.92 17.71 16.87 17.89 18.98 20.14 21.38 24.13 27.27 29.00 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34.35 Print Done