Cuppa Inc operates a chain of snack shops. The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,940,000 Expected annual net cash inflows are $1.800,000 with zero residual value at the end of ten years. Under Pian B. Cuppa woukl open three larger shops at a cost of $8,840,000. This plan is expected to generate net cash inflows of $1,400,000 per year for ten years, the estimated life of the properties. Estimated residual value is $1,125,000. Cuppa uses straight-line depreciation and requires an annual return of 10% (Click the icon to view the present value annuity factor tablo Click the loon to view the present value factor table.) (Click the icon to view the future value annuity factor table> Click the foon to view the future value factor tobie) Read the guitements Requirement 1. Compute the payback period, the ARR, and the NPV of these two plano What are the strengths and weaknesses of these capital budgeting models Begin by computing the payback period for both plans. (Round your answers to one decimal place) Plan A (in years) Plan B (in years) i Requirements thes 1. Compute the payback period, the ARR, and the NPV of these two plans. What are the strengths and weaknesses of these capital budgeting models? 2. Which expansion plan should Cuppa choose? Why? 3. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Reference - X to sic 20% 0.833 1.528 2.106 2.589 2.991 pg Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 Period 2 1.970 1.942 1.9131886 1.859 1.833 1.783 1736 1.690 1.647 Period 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 Period 5 4.853 4.713 4.580 4.452 43294212 3.993 3.791 3.605 3.433 Period 6 5.795 5.601 5.417 5.242 5,076 4.917 4.623 4.355 4.111 3.889 Period 7 6.728 6.472 6.230 6.002 5.786 5.5825.206 4.868 4.564 4.288 Period 8 7.6527325 70206.733 6.463 6.210 5.747 5.335 4.968 4.639 Period 9 8.566 8.1627.786 7.435 7.108 6.802 6.247 5.759 5.328 4.946 Period 10 9.471 8.9838.530 8.111 7.7227.360 6.710 6.145 5.6505.216 Period 11 10.368 9.787 9.2538.760 8.306 7.887 7.139 6.495 5.938 5.453 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 Period 1312.134 11.348 10.635 9986 9.394 8.853 7.904 7 103 6.424 5.842 Period 14 | 13.004 12 106 11.296 10563 9.899 9.295 8.244 1 7 367 6.628 6.002 16% 18% 0.862 0.847 1.605 1.566 2.246 2.174 2.798 2.690 3.274 3.127 3.685 3.498 4.039 3.812 4.344 4.078 4.607 4.303 4.833 4.494 5.0294.656 5.197 4.793 5.342 4.910 5.468 5.008 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4611 2.589 2.991 3.326 3.605 3.837 4.031 4.192 Period 4 3.902 3.808 3.717 3,630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 Period 5 4.853 4.713 4.580 4.452 4.3294212 3.993 3.791 3.605 3.433 3.274 3.127 Period 6 5.795 5.601 5.417 5.242 5.076 4.917 4623 4.355 4.111 3.889 3.685 3.498 Period 7 6.728 6.472 6.230 6.0025.786 5.5825.206 4.868 4.564 4.288 4.039 3.812 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 Period 9 8.566 8.162 7.786 7.435 7.108 6,8026.247 5.759 5.328 4.946 4.607 4.303 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.6505.216 4.833 4.494 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 4.656 Period 12 11.255 10.575 9.954 9.3858.8638.384 7.536 6.814 6.194 5.660 5.197 4.793 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.3676.6286.002 5.468 5.008 Period 15 13.865 12.849 11.938 11.118 10.380 9.7128.559 7.606 6.811 6.142 5.575 5.092 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.5147.469 6.623 5.929 5.353 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.8436.873 6.097 5.467 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.4278.055 7.003 6.177 5.517 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.7798.244 7.105 6.233 5.548 4.327 4.439 4.533 4.611 4.675 4.870 4.948 4.979 4.997 2% 1.000 Periods Period 1 Period 2 Period 3 Period 4 Period 5 14% 1.000 2.140 3.440 4.921 6.610 16% 1.000 2.160 3.506 5.066 6.877 18% 1.000 2.180 3.572 5.215 7.154 Period 6 Period 7 Period 8 Period 9 Period 10 Future Value of Annuity of $1 1% 3% 5% 6% 8% 10% 12% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2010 2020 2.030 2,040 2.050 2.060 2.080 2.100 2.120 3.030 3.060 3,091 3.122 3.153 3.184 3.246 3.310 3.374 4.060 4.122 4 184 4246 4310 4.375 4.506 4.641 4.779 5.101 5.204 5,309 5.416 5.526 5.637 5.867 6.105 6.353 6.152 6.308 6.468 6.633 6.802 6.975 7336 7.716 8. 115 7214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 8.286 8.583 9.214 9.549 9.897 10.637 11.436 12.300 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 10462 10.950 11.464 12.006 12.578 13.181 | 14.487 1593717549 11.567 12.169 12.808 13.486 14207 14.972 16.645 18.531 20.655 12.683 13.412 14 192 15.026 15.917 16.870 18.977 21.384 24.133 13.809 14 680 15618 16.627 17713 18.882 21.495 24.523 28.029 14.947 15 97417 086 18.292 19.599 | 21.015 24.215 27975 32 393 8.536 10.730 13.233 16.085 19.337 8 892 8.977 11.414 14.240 17519 21 321 25.733 30.850 36.786 43.672 20% 1.000 2.200 3.640 5.368 7.442 9.930 12.916 16.499 20.799 25.959 32.150 39,581 48,497 59 196 9.442 12.142 15.327 19.086 23.521 28.755 34.931 42.219 50.818 Period 11 Period 12 Period 13 Period 14 23.045 27 271 32.089 37581 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 5.101 5.204 5309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 6.152 6,308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 8,536 8.977 9.442 9.930 7214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12 142 12.916 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 12.300 13.233 14.240 15.327 16.499 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 16.085 17.519 19.086 20.799 10.462 10.950 11.464 12.006 12.578 13.181 14 487 | 15.93717.549 19.337 21,321 23.521 25.959 11.567 12.169 12.808 13.486 14 207 14.972 16.645 18.531 20.655 23.045 25.733 28.755 32.150 12.683 13.412 14.192 15.026 15917 16.870 18.977 21.38424.133 27 271 30.850 34 931 39.581 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 32.089 36.786 42219 48.497 14.947 15,974 17.086 18 29219.599 21.015 24 215 27.97532.393 37581 43.672 50.818 59. 196 1609717 29318.599 20.024 21.579 23 276 2715231772 37 280 43.842 51.660 60.965 72.035 22.019 24.297 26.870 29.778 33 066 36.786 45.762 57 27572.052 91.025 115 380 146.628 186.688 28.243 32.030 36.459 41.646 47 727 54 865 73.106 98.347 133 334 181.871 249.214 342603 471.981 34.785 40.568 47575 56.085 66.439 79.058 113.283 164 494 241.333 356.787 530.312 790.948 1,181 882 48.886 60.40275 401 95.026 120 800 154.762 259.057 442.593 767 091 1,342.0252,360.757 4.163 2137,343.858 Period 20 Period 25 Period 30 Period 40 t Reference -X n nt ta hl 5% hill Present Value of $1 Periods 1% 2% 3% 4% 6% 8% 10% 12% 14% 16% 18% 20% Period 1 0.990 0.9800.971 0.962 0.952 0.943 0.926 0.9090.893 0.877 0.862 0.847 0.833 Period 2 0.980 0.961 0.943 0.925 0.9070.890 0.857 0.826 0.797 0.769 0.7430.718 0.694 Period 3 0.971 0.942 0.915 0.8890.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0683 0.636 0.5920552 0.516 0.482 Period 5 0.951 0.906 0.863 0822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.4560.4100.370 0.335 Period 7 0.933 0.871 0.813 0.7600.711 0.665 0.583 0.513 0.4520.400 0.354 0.314 0.279 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.645 0.5920.500 0.424 0.361 0.308 0263 0.225 0.194 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.2700227 0.191 0.162 Period 110.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.1950.162 0.135 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 Period 14 0.870 0.758 0.661 0577 0505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 - Reference X pue n in pe th cd pps Jesic th th Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.5190.476 0.437 0.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0,507 0.456 0.410 0.370 0.335 Period 7 0.933 0.871 0.813 0.7600.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0279 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.1910.162 Period 110.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 Period 15 0.861 0.743 0642 0.555 0.481 0.417 0.315 0.239 0.183 0.1400.108 0.084 0.065 Period 20 0.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0 037 0.026 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 Period 40 0.672 0.453 0307 0,208 0.1420.097 0.046 0.022 0011 0.005 0.003 0.001 0.001 udg ay - Reference od al Future Value of $1 he ch Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 8% 1.080 1.166 1260 1360 1.469 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1254 1.405 1.574 1.762 16% 1.160 1.346 1.561 1.811 2.100 18% 1.180 1.392 1.643 1939 2.288 20% 1.200 1.440 1.728 2.074 2.488 the mo -yb Period 6 Period 7 Period 8 Period 9 Period 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.419 1.587 1.772 1.407 1.504 1.714 1.949 1.477 1.594 1.851 2.144 1.551 1.689 1.999 2.358 1.629 1.791 2 159 2.594 1.710 1.898 2.332 2.853 1.796 2012 2518 3 138 1.886 2.133 2.720 3.452 19802261 2.937 3797 1.974 2.211 2.476 2.773 3.106 14% 1.140 1.300 1.482 1.689 1.925 2. 195 2502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 2.436 2.826 3.278 3.803 4411 2.700 3.185 3.759 4.435 5.234 2.986 3.583 4.300 5.160 6.192 Period 11 Period 12 Period 13 Period 14 1.116 1.127 1,138 1.149 1.243 1.268 1.294 1 319 1.384 1.426 1.469 1513 1.539 1601 1.665 1732 3.479 3.896 4 363 4887 5.117 5.936 6.886 7988 6.176 7.288 8.599 10. 147 7.430 8.916 10.699 12.839 Reference - X Period 4 Period 5 1.041 1.051 1.082 1.104 1.126 1.159 1.170 1217 1.811 1.216 1.276 1.262 1.338 1.360 1.469 1.464 1.611 1.689 1.925 2.100 Period 6 Period 7 Period 8 Period 9 Period 10 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1480 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1689 1.791 1,587 1.714 1.851 1.999 2.159 1.772 1.949 2.144 2.358 2.594 1.574 1762 1.974 2211 2476 2.773 3.106 2.195 2.502 2.853 3.252 3.707 2436 2826 3278 3.803 1.939 2.288 2.700 3.185 3.759 4.435 5.234 2.074 2.488 2.986 3.583 4.300 5.160 6.192 Period 11 Period 12 Period 13 Period 14 Period 15 1.062 1.126 1.072 1.149 1,083 1.172 1.094 1.195 1.105 1.219 1.116 1.243 1.127 1.268 1.138 1.294 1.149. 1.319 1.161 1346 1220 1.486 1.282 1.641 1.348 1,811 1.489 2.208 1,384 1.426 1.469 1.513 1.558 1.539 1601 1.665 1.732 1 801 1.710 1.796 1.886 1.980 2.079 1898 2.332 2.853 3.479 4226 5.117 6.176 7.430 2012 2.518 3.138 3.896 4.818 5.936 7288 8916 2.133 2.720 3.452 4.363 5.492 6 886 8.599 10.699 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12 839 2.397 3.172 4.177 5.474 7.138 9.266 11.974 15.407 3.207 4661 6.727 9.646 13.743 19.461 27.393 38.338 4292 6.848 10.835 17.000 26.462 40.874 62.669 95 396 5.743 10.06317.449 29.960 50.950 85.850 143.371 237.376 10.286 21.725 45.259 93.051 188.884 378.721750.3781,469.772 Period 20 Period 25 Period 30 Period 40 1.806 2.094 2427 3.262 2 191 2.666 3.243 4.801 2.653 3,386 4.322 7.040