DI Lajos 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.) (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.) Amount invested / Expected annual net cash inflow Payback Plan A $ 8,440,000 / $ 1,550,000 5.4 years Plan B 8,150,000 1,030,000 7.9 years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Average annual operating income Average amount invested ARR Plan A $ 706,000 4,220,000 16.7% Plan B 325,000 4,625,000 7.0 % / s 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 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=10%, n=10) (i=10%, 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 * More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,440,000. Expected annual net cash inflows are $1,550,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lajos Company would open three larger shops at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,030,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,100,000. Lajos Company uses straight-line depreciation and requires an annual return of 10%. 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 Lajos Company choose? Why? . Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? 105/16 2014 Present Value of $1 | Periods | 1% 2% | 3% 14% 15% 6% 7% 8% 9% 10% | 12%] 14% 15%] 16%]18% | 20%] 10.99010.9800.9710.9620.95210.94310.93510.9260.9170.909|0.893 0.8770.870 0.8620.8470.833 10.98010.9610.94310.92510.9070.890 0.87310.8570.84210.826|0.797|0.769|0.756|0.7430.718|0.694 10.9710.94210.9150.8890.8640.8400.8160.7940.77210.7510.7120.675|0.658|0.6410.609|0.579 10.9610.9240.888|0.855|0.8230.7920.7630.7350.7080.6830.636|0.592|0.572|0.552|0.5160.482 10.9510.906|0.8630.82210.7840.7470.7130.6810.6500.621|0.567|0.519|0.4970.476|0.4370.402 10.94210.888|0.8370.7900.746|0.7050.6660.630|0.596|0.5640.5070.456|0.432|0.410|0.370|0.335 7 0.93310.87110.81310.760 0.7110.650.6230.58310.5470.513|0.4520.400|0.376|0.3540.3140.279 10.9230.85310.7890.7310.6770.627|0.58210.540|0.502]0.4670.404|0.3510.3270.3050.266 0.233 10.9140.8370.766|0.70310.645|0.59210.544]0.5000.46010.4240.3610.3080.2840.2630.225|0.194 10 0.90510.82010.74410.67610.61410.558|0.50810.46310.42210.3860.32210.27010.247|o.227|o.191 0.162 |o.8960.8040.72210.650|0.585|0.5270.4750.4290.38810.350 0.2870.2370.215|0.1950.16210.135 10.8870.788|0.7010.625|0.5570.4970.444]0.3970.3560.319|0.2570.2080.1870.168|0.1370.112 0.87910.77310.6810.601]0.53010.4690.4150.36810.3260.2900.229|0.1820.1630.145|0.116|0.093 4 0.87010.75810.66110.577|0.50510.44210.38810.3400.29910.26310.205|0.1600.1410.125 0.099 0.078 10.8610.7430.642]0.555|0.4810.4170.36210.3150.2750.239|0.1830.1400.1230.108|0.0840.065 16 0.85310.72810.62310.53410.4580.39410.33910.29210.25210.218|0.1630.12310.107 0.093 0.071 0.054 10.8440.7140.605|0.51310.4360.37110.31710.270 0.2310.1980.146|0.1080.0930.0800.0600.045 10.8360.700|0.5870.4940.4160.3500.2960.25010.21210.180|0.1300.0950.0810.069|0.0510.038 19 0.82810.686|0.57010.47510.396 0.3310.2770.23210.1940.164|0.116 0.083 0.070 0.060 0.043 0.031 10.82010.67310.5540.4560.3770.31210.2580.215|0.178|0.149|0.1040.0730.0610.0510.0370.026 34567890m2B46 BNB9%a888888www 10.811/0.660|0.53810.43910.35910.294/0.24210.19910.16410.13510.09310.064/0.05310.04410.03110.022 |0.80310.647/0.52210.42210.34210.27810.226/0.184/0.1500.12310.08310.05610.04610.03810.026/0.018 10.7950.634]0.5070.4060.3260.2620.2110.17010.138|0.11210.0740.049|0.040 0.0330.0220.015 10.788|0.62210.49210.390 0.31010.2470.1970.1580.126|0.10210.066|0.0430.035|0.028|0.019|0.013 25 0.78010.61010.47810.37510.295 0.23310.18410.14610.11610.09210.059 0.038 0.030 0.024 0.016 0.010 26 0.77210.59810.46410.3610.2810.220]o.17210.13510.10610.0840.053 0.033 0.026 0.021 0.014 0.009 10.764|0.58610.450|0.3470.2680.207|0.16110.125|0.0980.0760.047|0.029|0.0230.018|0.011 0.007 10.7570.5740.4370.3330.255|0.196|0.150|0.116|0.0900.0690.0420.026|0.020 0.016|0.0100.006 10.749|0.5630.424|0.3210.24310.1850.1410.1070.0820.0630.0370.0220.0170.0140.008|0.005 |0.74210.5520.41210.3080.2310.1740.1310.0990.0750.0570.0330.0200.015|0.0120.007 0.004 |o.67210.45310.30710.20810.14210.097|0.0670.046|0.03210.022 0.011 0.005 0.004 0.003 0.001 0.001 10.60810.37210.2280.1410.08710.05410.0340.0210.013/0.009 0.003 0.001 0.001 0.001 OF Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 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|0.862|0.847|0.833 1.970 1.942 1.913 1.886 1.8591.8331.808 1.783 1.759 1.736 1.6901.647 1.6261.6051.5661.528 2.9412.8842.8292.775 2.723 2.6732.624 2.577 2.531 2.4872.4022.3222.2832.2462.174/2.106 3.902 3.808 3.717 3.630 3.546 3.465 3.3873.3123.240 3.170 3.037 2.914 2.8552.798|2.6902.589 4.8534.7134.580 4.452 4.329 4.212 4.100 3.9933.890 3.791 3.605 3.433|3.352 3.274 3.127|2.991 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.1113.8893.7843.685|3.498|3.326 5.2065.033 14.868/4.5644.288|4.1604.039|3.8123.605 5.7475.535|5.3354.9684.639|4.487|4.344|4.078[3.837 8.566 8.1627.786 7.435 7.108 6.802 6.515 6.247 5.9955.7595.3284.9464.7724.607 4.3034.031 9.471 8.983 8.530 8.111 7.7227.360 7.024 6.710 6.418 6.1455.6505.2165.0194.833 4.494 4.192 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.4535.234/5.0294.656 4.327 11.255 10.575 9.954 9.3858.8638.384 7.943 7.536 7.161 6.8146.1945.6605.4215.197 4.793 4.439 12.134 11.348 10.6359.986 9.394 8.853 8.358 7.904 7.487 7.1036.4245.8425.5835.342 4.910 4.533 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.3676.6286.0025.7245.468|5.008 4.611 13.865 12.849 11.938 11.118/10.380 9.7129.108 8.559 8.061 7.6066.8116.142 5.8475.575 5.092 4.675 16 14.71813.578 12.561 11.652 10.838 10.1069.447 8.851 8.313 7.8246.97416.2655.9545.6695.1624.730 15.562 14.292 13.166 12.166 11.274 10.4779.763 9.122 8.544 8.0227.1206.373/6.0475.7495.2224.775 18 16.398 14.992 13.754 12.65911.690 10.828 10.059 9.372 8.756 8.2017.250 6.467/6.1285.8185.2734.812 19 17.226 15.678 14.32413.134 12.08511.158 10.336 9.604 8.950 8.365 7.3666.550/6.1985.8775.3164.844 20 18.046 16.35114.877 13.590 12.462 11.47010.594 9.818 9.129 8.51417.4696.623/6.259 5.9295.3534.870 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.6497.5626.6876.3125.9735.384 4.891 22 19.660 17.658 15.937|14.451 13.16312.042 11.061 10.2019.442 8.772/7.6456.7436.3596.0115.4104.909 23 20.456 18.292 16.444 14.857 13.48912.303 11.272 10.371 9.580 8.8837.7186.7926.3996.0445.4324.925 24 121.24318.914 16.93615.247 13.79912.550 11.469 10.529 9.707 8.9857.7846.8356.4346.073|5.4514.937 |22.02319.52317.41315.622 14.094 12.783 11.654 10.675 9.8239.077 7.8436.8736.4646.097|5.4674.948 22.795/20.12117.877 15.983 14.375 13.003 11.826 10.810 9.929 9.161 7.8966.906|6.4916.118|5.4804.956 27 123.560 20.707 18.32716.33014.64313.211|11.987 10.935 10.0279.237 7.9436.935/6.5146.136|5.4924.964 28 24.316|21.28118.764 16.663 14.89813.406 12.137 11.051 10.116|9.307 7.9846.9616.53476.1525.5024.970 29 25.066/21.844 19.18816.984 15.14113.591 12.278 11.158 10.1989.3708.0226.9836.551|6.1665.5104.975 30 25.80822.39619.600 17.29215.372 13.76512.409 11.25810.27419.427|8.0557.003/6.566/6.177|5.517|4.979 32.835/27.355|23.115 19.793 17.159 15.04613.332 11.925/10.7579.7798.244 7.1056.6426.233|5.548|4.997 50 39.196 31.42425.73021.48218.256 15.762 13.801 12.233 10.9629.915 8.3047.1336.6616.2465.5544.999 480 1.629)1.791)1.8381.999/2.172/2.353/2.478/2.853/3.059) Future Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.010 1.020 1.030 1.040 1.050 1.060 1.070 1.080 1.090 1.100 1.120 1.140 1.150 1.020 1.040 1.061 1.082 1.103 1.124 1.145 1.166 1.1881.210 1.254 1.300 1.323 1.030 1.061 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.405 1.482 1.521 1.041 1.082 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.574 1.689 1.749 1.051 1.104 1.159 1.217 1.2761.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 1.062 1.126 1.194 1.2651.340 1.419 1.501 1.587 1.677 1.772 1.974 2.1952.313 1.072 1.149 1.2301.3161.407 1.5041.606 1.714 1.828 1.949 2.2112.502 2.660 1.083|1.1721.2671.369/1.477|1.594 1.718 1.851 1.9932.144 2.4762.853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.773 3.252 3.518 1.105 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 1.1161.243 1.384/1.539 1.710|1.898 2.1052.3322.580 2.853|3.479 4.2264.652 1.127 1.2681.4261.601 1.796 2.0122.2522.5182.813|3.138 3.896 4.818 5.350 1.138 1.294 1.469 1.665 1.8862.1332.4102.720 3.0663.452 4.3635.4926.153 1.149 1.319 1.513 1.732 1.980|2.261 2.579 2.937 3.342 3.798 4.8876.261 7.076 1.161 1.346 1.558 1.801 2.079 2.397 2.759 3.172 3.642 4.177 5.474 7.1388.137 16 1.1731.373 1.6051.8732.1832.5402.952 3.426 3.970 4.5956.130 8.1379.358 1.184 1.400 1.653 1.948|2.2922.6933.159 3.700 4.3285.054 6.8669.276 10.76 1.1961.428 1.702 2.0262.407 2.854 3.380 3.996 4.717 5.560 7.690 10.58 12.38 1.208 1.457 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 20 1.2201.4861.8062.1912.6533.2073.870 4.6615.604 6.727 9.646 13.7416.37 1.232 1.5161.860 2.279 2.786 3.400 4.1415.034 6.1097.400 10.80 15.67 18.82 1.245 1.546 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 12.10 17.86 21.64 1.257 1.577 1.974 2.465 3.072 3.820 4.741 5.871 7.258 8.954 13.55 20.36 24.89 1.270 1.608 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 15.18 23.21 28.63 1.282 1.641 2.094 2.666 3.386 4.292 5.4276.848 8.623 10.83 17.00 26.46 32.92 1.295 1.6732.157 2.772 3.556 4.5495.8077.396 9.399 11.92 19.04 30.1737.86 1.308 1.707 2.221 2.883|3.733 4.8226.214 7.988 10.25 13.11 21.32 34.39 43.54 1.321 1.7412.2882.999 3.9205.1126.649 8.627 11.17 14.4223.88 39.20 50.07 1.335 1.7762.357 3.119 4.1165.418 7.1149.317 12.17 15.86 26.75 44.69 57.58 1.348 1.811 2.427 3.243 4.322 5.743 7.612 10.06 13.27 17.45 29.96 50.95 66.21 40 1.489 2.208|3.2624.801 7.040 10.29 14.9721.72 31.41 45.26 93.05 188.9 267.9 50 1.645|2.6924.384 7.107 11.47 18.42|29.46 46.90|74.36 117.4289.0 700.2 1,084 Future Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 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 2.010 2.020 2.030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.030|3.060|3.091 3.122 3.153|3.1843.215 |3.246 3.278 3.310 3.374 3.440 3.473 4.0604.1224.184 4.246 4.310 4.375 4.440 4.5064.573 4.641 4.779 4.921 4.993 5.101 5.204 5.3095.416 5.526 5.637 5.751 5.867 5.985 6.105 6.353 6.610 6.742 16.152 6.3086.4686.6336.8026.975 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 8.9239.2009.487 10.09 10.73 11.07 8.2868.5838.8929.2149.549 9.89710.260 10.64 11.03 11.44 12.30 13.23 13.73 9 9.3699.755 10.16 10.58 11.0311.49 11.98 12.4913.02 13.58 14.78 16.09 10 10.46 10.9511.46 12.01 12.58 13.18 13.82 14.4915.1915.94 17.55 19.34 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 12.68 13.41 14.19 15.03 15.92 16.87 17.89 18.98 20.14 21.38 24.13 27.2729.00 13.81 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34.35 14 14.95/15.97|17.0918.2919.6021.02 22.55 24.21|26.02 27.98|32.39 16.10 17.29 18.60 20.02 21.58 23.28 25.13 27.15 29.36 31.77 37.28 43.84 47.58 17.2618.6420.1621.8223.6625.67 27.89 30.32 33.00 35.95 42.75 50.98 55.72 18.43|20.01 21.76 23.70 25.84 28.21 30.84 33.75 36.97 40.54 48.88 59.12 65.08 19.61 21.41 23.41 25.65 28.13 30.91 34.00 37.45 41.30 45.60 55.75 68.39 75.84 20.81 22.84 25.12 27.67 30.54 33.76 37.38 41.45 46.02 51.1663.44|78.9788.21 22.02 24.30 26.87 29.78 33.07 36.79 41.00 45.76 51.16 57.28 72.05 91.02 102.4 23.2425.78|28.68|31.97 35.72 39.99 44.87 50.4256.76 64.0081.70104.8 118.8 124.4727.30 30.5434.25 38.5143.3949.01 55.46|62.87 71.40 92.50 120.4 137.6 25.72 28.85 32.45 36.62 41.4347.00 53.44 60.89 69.53 79.54 104.6 138.3 159.3 26.9730.42 34.4339.08 44.50|50.82 58.18 66.76 76.7988.50 118.2158.7 28.24 32.03|36.4641.65 47.73|54.86 63.25 73.11 84.70 98.35133.3181.9 212.8 26 29.53|33.67|38.5544.31 51.11 59.1668.68 79.9593.32 109.2 150.3.208.3245.7 30.82 35.3440.71 47.08|54.6763.7174.48 87.35 102.7 121.1 169.4238.5 283.6 32.13 37.05 42.9349.97 58.4068.53 80.70 95.34 113.0 134.2 190.7 272.9 327.1 33.4538.79 45.2252.97|62.3273.64 87.35 104.0124.1148.6214.6 312.1 377.2 34.78 40.57 47.58 56.08 66.44 79.06 94.46 113.3 136.3 164.5 241.3 356.8 434.7 48.8960.4075.40 95.03120.8 154.8 199.6 259.1 337.9442.6767.1 1,342 1,779 50 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