Drop down options:

Requirement 1 (pt 1): Amount invested, Average amount invested, Expected annual net cash inflows, Present value of net cash inflows

Requirement 1 (pt 2): Amount invested, Average amount invested, Average annual operating income, Present value of net cash inflows

Requirement 1 (pt 3):

Amount invested, Average annual operating income, Initial investment, Present value of net cash inflows

Requirement 2: APR, Net present value, Payback method, Profitability index

Requirement 3:

Plan A or Plan B

Longer or Shorter

Higher or Lower

Higher or Lower

Higher or Lower

Requirement 4:

8-9, 9-10, 10-12, 12-14, 14-15 (%)

Does not exceed or Exceed

More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,400,000. 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 $8,100,000. This plan is expected to generate net cash inflows of $1,000,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $980,000. Lajos Company uses straight-line depreciation and requires an annual return of 10%. i Reference Present Value of $1 Periods 1% 12% 20% | 4% 25 71 Q343 15 1 1 1 1 Q342 4 5% 2 4 ,4 % 43 4 72 Q:747 85 18 Q13 0926 Q94 ! 10% 909 26 1 42 . . .60 @ 12 Q838 14% .52 Q13 15% Q. 8 6 Q572 .497 16% 743 41 .882 1.47 1 47 Q71 QQ 518 .4 94 Q5 .4 .4 4 LE. 22 21 Q342 410 4 1 3 . Q:44 . ,760 @ 1 . Q .48 .11 Q645 14 5 27 892 .8 QS .62 1.52 .544 0.50 5 Q.540 Q500 1.48 .8 547 502 .4 Q.422 Q4 813 1.457 .424 2.482 2.404 81 22 .4 .400 Q351 Q270 .42 Q224 247 14 .266 .225 .1 Q235 Q2 14 1 14 6 26 .227 1 11 12 13 14 16 16 Q112 4 . , Q74 081 Q. 22 Q1 1 1 642 60 $25 Q601 Q5 5 500 2.41 .45 Q.444 .415 827 .47 .4 442 .417 .49 Q340 18 368 6 2 2.275 80 19 20 26 Q239 25 .229 1 .27 .20 .1 .1 2.140 Q215 1 Q1 2.141 18 1 1 Q.146 .15 108 Q12 2.17 Q116 4 QQ 44 18 17 1 13 .714 64 524 813 .44 1.46 468 .453 .4 0.418 4 1 360 1 12 .277 25 292 2 250 Q232 218 252 .231 2.212 Q.14 2.17 .21 1 Q1 .14 149 2.1 Q.148 .1 :118 .14 18 1 QQ 127 1 QQQ | @@ 64 Q.00 QQ 045 1 QQ Q043 Q1 1 .026 0 21 1 47 4 Q22 Q1.5 822 807 .492 .49 0.422 406 69 42 Q10 .234 278 22 247 242 226 211 197 Q1 .14 Q1 158 @14 Q10 2.1 Q128 .1 Q123 .112 .102 . .03 .074 Q.CO66 Q064 6 Q049 043 .063 046 040 05 Q044 @@ QQ28 ] .026 22 19 .022 Q015 Q13 24 01 Q322 14 905 13 Q:44 760 031 , 0.711 Q67 Q645 14 6 0.52 1.558 1.52 544 50 58 Q540 Q500 1.46 1547 1502 .4 .422 813 1.457 1.424 0.452 .404 0361 Q:22 0.400 51 0.2 6 24 247 4 306 0.2 0.227 14 Q266 .225 Q11 Q279 Q2 2.14 Q.18 20 1 4 11 12 13 14 16 1 722 1 1 Q81 $42 60 25 1 87 .5 .87 Q.530 .421 2 Q.497 2.4 .442 2.417 Q4 .444 .415 2.429 40 Q15 0386 2 Q275 360 Q13 2.2 .23 25 29 2.26 1 Q237 2 1 160 Q140 Q215 .1 1 141 1 1 2.1 Q.146 15 Q.1 1 17 Q116 4 .1 112 . Q:743 18 17 1 12 44 20 14 068 08 .5 4 0524 813 .44 45 .456 .4 .4$ .418 371 50 1 Q12 Q295 2 258 292 2 250 22 Q215 22 1 212 14 1 21 .198 Q1 2.14 Q.149 2.1 .148 .1 Q116 4104 .1 Q107 . :10 0 06 0.01 Q069 0.00 QQ Q1 Q1 QQ71 .@ 1 043 64 046 . Q. 1 0.028 21 11 Q4 Q34 $22 0610 24 % .522 807 .492 .47 49 42 .4 Q376 353 42 Q326 Q10 .2 .234 27 2.2 247 2 242 228 211 Q17 Q.14 1 014 2.1 2.1 Q.148 .14 1 .1 126 118 .1 2.18 112 12 092 Q0 Q074 QUE 64 .066 .049 .048 . % 046 040 .@ 0044 073 028 024 0.1 22 .028 1 0.022 QQ15 2013 18 @720 27 29 4 .49 .42 98 55 574 .56 888 .464 .450 .4 0.424 Q412 1 Q347 Q321 21 25 255 2.248 221 2.220 .207 1 1 .174 1 14 Q150 Q141 11 15 2.125 Q116 Q107 106 098 .090 .02 QQ75 04 076 063 063 Q057 .047 QQ42 Q.029 .026 Q022 020 028 2. .020 QQ17 QQ15 0.021 Q014 Q11 16 @@@ Q14 QQ12 Q2007 006 004 47 1.48 30 .20 142 .048 . Q022 Q11 Q006 Q004 003 0.001 @@ 50 @@ 228 .141 4 Q4 .021 QQ13 QQ 2001 Q001 0.001 Reference Periods 4% 20% 1 2 1 QQ 1.Q 1942 241 24 3.08 4.52 4.713 3% 971 1313 2.23 3.17 4.5 1. 2. 3 4.452 % 952 159 2.723 3546 4. Present Value of Ordinary Annuity of $1 6% 10% Q34 0.985 26 1 1. 17 1.78 1. 2 24 2. 251 2.4 3.465 12 3.240 3.1 4.212 4.10 3.1 12% 14% 10 147 2.402 22 2.14 306 3.4 15% 1626 2.2 2.866 62 16% 1.66 2.248 2.798 3.274 18 47 1.5 2.174 2 3.127 1.52 2.1 2.5 2 4 5 5.7% 5.72 652 86 471 51 $472 162 5.417 6.2 7020 5.242 02 7.435 .111 5.78 5.78 $468 710 7722 4. 552 6.210 0 4.787 53 5.71 $56 7024 4. 5.2 5.747 6.247 8710 4.48 50 5566 6.9% 8.41 4.366 4. 5 5.759 $145 4.111 4.564 4. 5 5 4.2 4.8 4.4$ 5.216 3.74 4.1 4.4 4. 5.19 3.85 4. 4.44 4. .49 312 4. 4.0 4.494 3.326 36 4.1 4.1 1 7.49 948 11 12 13 14 16 10 3.25 , 11.2|15754 12.14] 11.34 |108 34 4 |12.1 11.2|108 9.2% 13] 12.34] 11.11.11| 10 12 7.1 E4% 7.5 7.14 14 904 7.4 7.1 .244 8 1 5 6.14 $424 5.45 50 5842 2002 142 5.234 5.421 5.5 5.724 547 5.028 5.17 5342 5.4 5575 4.8 4. 4.10 50 5.92 4. 4.49 4.53 4.11 4.75 ,745 2.1 611 $25 18 17 1 13 20 4 201 514 74 7.12 7.250 , .4 $457 $50 $ 5.4 5 647 5.749 $1 51 198 5 $25 59 5.1 5222 5.2 5.316 5.252 14.71] 13.8] 12.81 | 11.82 | 1|10.1 4447 1 13 15.58 | 14.22 | 13.1|12.111.274 | 10.47 76 1 844 16 | 14.2 | 13.754 | 129 | 11.60] 10| 109 72 ,66 17.228 | 15.7| 14.24 | 13.14| 12.0 | 11.15|10 04 950 1048 | 16.81 14 | 13. | 12.42 | 11.4 10.94 31 129 1]1701|15.415 14.121111.74]1 |10 9.22 19.| 17 15.7] 14.451 | 13.1|12.042 | 11.1|10.201 9442 0.456 | 13.22 | 16.444 | 14.8 13.4 12.3 | 11.2 | 10.31 5 21.24 | 1.14 | 18.16.247 | 13.12.50 | 11.4 10.523 4. 4.776 4.12 4.244 4. 21 .849 562 645 4 74 792 12 5 88 11 $39 5044 6.44 5.4 5.410 5.432 5.41 4. 4.99 4.325 4. 24 Reference Periods 4% 20% 1 2 1 QQ 1.Q 1942 241 24 3.08 4.52 4.713 3% 971 1313 2.23 3.17 4.5 1. 2. 3 4.452 % 952 159 2.723 3546 4. Present Value of Ordinary Annuity of $1 6% 10% Q34 0.985 26 1 1. 17 1.78 1. 2 24 2. 251 2.4 3.465 12 3.240 3.1 4.212 4.10 3.1 12% 14% 10 147 2.402 22 2.14 306 3.4 15% 1626 2.2 2.866 62 16% 1.66 2.248 2.798 3.274 18 47 1.5 2.174 2 3.127 1.52 2.1 2.5 2 4 5 5.7% 5.72 652 86 471 51 $472 162 5.417 6.2 7020 5.242 02 7.435 .111 5.78 5.78 $468 710 7722 4. 552 6.210 0 4.787 53 5.71 $56 7024 4. 5.2 5.747 6.247 8710 4.48 50 5566 6.9% 8.41 4.366 4. 5 5.759 $145 4.111 4.564 4. 5 5 4.2 4.8 4.4$ 5.216 3.74 4.1 4.4 4. 5.19 3.85 4. 4.44 4. .49 312 4. 4.0 4.494 3.326 36 4.1 4.1 1 7.49 948 11 12 13 14 16 10 3.25 , 11.2|15754 12.14] 11.34 |108 34 4 |12.1 11.2|108 9.2% 13] 12.34] 11.11.11| 10 12 7.1 E4% 7.5 7.14 14 904 7.4 7.1 .244 8 1 5 6.14 $424 5.45 50 5842 2002 142 5.234 5.421 5.5 5.724 547 5.028 5.17 5342 5.4 5575 4.8 4. 4.10 50 5.92 4. 4.49 4.53 4.11 4.75 ,745 2.1 611 $25 18 17 1 13 20 4 201 514 74 7.12 7.250 , .4 $457 $50 $ 5.4 5 647 5.749 $1 51 198 5 $25 59 5.1 5222 5.2 5.316 5.252 14.71] 13.8] 12.81 | 11.82 | 1|10.1 4447 1 13 15.58 | 14.22 | 13.1|12.111.274 | 10.47 76 1 844 16 | 14.2 | 13.754 | 129 | 11.60] 10| 109 72 ,66 17.228 | 15.7| 14.24 | 13.14| 12.0 | 11.15|10 04 950 1048 | 16.81 14 | 13. | 12.42 | 11.4 10.94 31 129 1]1701|15.415 14.121111.74]1 |10 9.22 19.| 17 15.7] 14.451 | 13.1|12.042 | 11.1|10.201 9442 0.456 | 13.22 | 16.444 | 14.8 13.4 12.3 | 11.2 | 10.31 5 21.24 | 1.14 | 18.16.247 | 13.12.50 | 11.4 10.523 4. 4.776 4.12 4.244 4. 21 .849 562 645 4 74 792 12 5 88 11 $39 5044 6.44 5.4 5.410 5.432 5.41 4. 4.99 4.325 4. 24 Reference $72 82 9.471 $472 25 1 552 $210 6.2 Q .50 002 6. .45 .111 5.7 $468 1 772 53 51 6515 4 5.2 5.747 $247 10 5. 5.5 5.996 $41 4. 5.85 5.769 $145 4.584 4. 5.2 550 4.2 4.6 4.4$ 5.216 4.1 4.4 4.72 5 4. 4.344 4.607 4. 312 4. 4. 4.494 3606 3. 4.1 4.1 0 11 12 13 14 16 1 11.2] 10.55 4 12.14] 11.34] 105|9.3 994 1304 | 12.1111.2]105 3 13] 12.34] 11.11.11| 10 4 25 12 7.49 948 1 7.1 6.4% 7.11 614 904 7.4 7.1 244 , .88 1 5. 14 $424 $ 11 5.45 5 542 6.02 $.142 5.234 5.421 5.5 5.724 547 5.09 5.17 5342 5.468 5575 4.68 4.72 4.19 5 5.2 4. 4.49 4.5 4.11 4.5 18 17 1 13 14.71]13712.1111.21110.1 447 1 15.58] 14.22] 13.1 12.1 | 11.274 | 10.477 3.122 16 | 14.2 | 13.754 | 129 | 11.60] 10| 109 3 17.226|168| 14.24 | 13.14| 120 | 11.1|108 04 1047|161114.37711312.4| 11.4]10504 1 13 544 , 3.19 24 .022 .21 74 7.120 7.250 7.469 26 54 6.047 $487 6.1 $550 1 6.28 5. 5749 51 5. 592 5.12 5.222 5.2 5316 5.388 4. 4.776 4.12 4.44 4. .514 $49 2 21 2 24 % 17]1711116.416 14.29]121 111.784 11|1 9.22 19] 17 | 15.114.451 | 13.1 | 12.042 | 11.1 | 10.21 9.442 0.41 .16.444] 14.73.4|12.111.22|10.31 8 21.24 | 1.14 | 16 15.247] 13. | 12.50 | 11.4|10.529 22 13.117.413162 114.4 12.7 111.64 |10875 3 582 846 $742 72 774 4 6 12 359 $424 $.44 53 11 $44 Q3 54 5.410 5.4 5.451 5.487 4.1 4. 4.25 4. 4.34 2. | .121 177 | 16.| 143 | 13. | 11.28 | 11 323 11 3.5.7 | 12716| 14.84 | 13.211 | 11.| 109 1. 237 24.318 | 21.21|1.764 | 168 | 14.| 13.4] 12.17 | 11.1 10.116 | 21.44]1314 16.141 |13112211.1|10.1 25.12| 1960 | 17.22 | 15.3 13.| 12.4 | 11.25 10.274 9.427 27 96 4 984 2 , 60 1 $.41 514 584 51 6.5 6.11 136 6.12 1 6.177 5.480 5.492 5802 5510 5517 4. 4.84 4.97 4.35 4. 47 | 27| 8.116| 19.171| 15.04 |1 | 11.25 1.57 244 716 $642 $28 5.54 4. 11.424 | 8| 21.4|1.256 | 15.7 | 131 | 12.2 1 915 4 7.1 881 $246 5.884 4. Future Value of $1 Periods * 2 3 4 5 % 1.2010 1.Q 1. 1.041 161 1.020 1.040 11 1.0 1.14 3% 1.0 1.1 1.093 1.12 1.18 4% 1.040 1.02 1.15 | 1.170 1.217 1.60 1.1 1.1 1.216 1.2 % 1.60 1124 111 1.22 1 % 1.00 1.146 1.225 111 1.4 1.00 1.1 1.2 10 1.469 1. 1.1 1.295 1.412 1.5 10% 1.10 1.210 1. 1 1.464 1.811 12% 1.1 1.254 1.4% 174 1.72 14% 1.147 100 1.4 1. 1.925 15% 1.150 1. 1521 1749 21 21 * 1.2 1. 1.02 14 1.1 1126 1.149 1.1 11 1.21 1.14 1.2 1. 1.305 144 1.25 140 1.413 116 1.407 1504 19 1.47 194 1.42 181 1. 1.40 19 1.1 1.1 1. SOR 171 1. 1 1.5 1.714 11 1999 2.159 1. 1 1. 2.1 2 12 174 1948 2.211 2.144 2.4 2.6g 2.77 2.594 3.1 2.1% 2.502 3252 9 1 69 381 4.046 3.4 11 12 13 1118 1.127 1.1 1.149 1.11 1.248 126 1.294 1.19 1348 14 1.42% 1.4 1513 16 1.5 1.E01 1.665 1. 1.1 1.10 17 1. 1. 2 18 2012 2.1 2.21 27 2.16 2.252 2.410 2.5 2.769 2.32 2.1 2.720 2 1 2.5 2.13 36 342 $42 13 3.42 3. 4.1 4.228 4.18 5.42 6261 1 4.36 4. 5.474 4.82 580 $15 08 .17 14 15 252 3.159 16 17 1 12 1.1 114 1.1 120 1.220 1 1.400 1.42 1.457 1.4 106 1 1.702 1.764 106 1. 1.4 2026 2.17 2.11 2.1 2.22 2.40 2. 2.66 2.540 2 24 26 3.207 3.428 3Q 4. 4.717 4.18 5.142 4.81 5.604 5.4 6.1 5.437 869 51 725& 6.41 11 4.55 5.64 5.5 $116 6.727 8.1 6 $13 9.646 .17 3.2 12.5g 12. 13.4 12 12 14.22 16.37 17 21 1.22 1245 1257 1.270 1.816 1546 137 10 1 1.18 1974 2.0 2279 237 2.46 2.56 2. 2.25 3 3.226 3.400 304 320 4.43 4.141 4.4 4.741 5072 7.400 .140 64 50 1 12.10 1356 15.1 15.87 17 36 .21 1 214 24. 24 X Reference hr 102 1.0 1.94 1.1 1.149 1.172 11 1.213 1.230 1.28 10 1.344 1.318 1 1.422 1.4Q 1.407 1.477 11 1. 1.04 1.84 16 1.1 1. 1.1 1. 1. 1.714 11 1. 2.18 1. 1992 2.12 2 143 2.144 238 2.594 2.211 2.476 2.73 3.1 2.52 2388 3.252 3.707 260 059 351 4.048 L 1 11 12 13 14 16 1.118 1.127 1.1 1.149 1181 1.243 1.26 1.234 113 1.346 14 15 1.1 1. 1.426 1.1 1. 2012 1.4 16 18 21 1513 1.7 1. 2.26] 1.85 11 2079 27 .1 2.22 2.419 2.5 2.78 2.32 2.51 2.720 27 3.1 8 2.12 3.342 3842 2 31 3.452 & 4.1 4 3.896 4. 4. 5.474 4.226 4.1 5.42 1 1 4.62 5350 158 07 .17 252 3.18 3.428 3. 18 17 1 13 1.1 114 1.1 120 1.220 13 1.40 1.42 1.457 1.4 106 1. 1. 1.764 106 1. 14 2.026 2.107 2.1 2.1 2.22 2.407 2.27 2.63 2540 28 24 025 3.207 4. 4.17 5.142 5604 4. 564 5.560 118 8.27 6.10 890 813 9646 .17 9.26 10 12. 13.74 6& 10. 12 14.8 167 3 4.316 4.1 21 1. 1.246 1.257 1.2 122 1818 1.546 1 1. 141 1 118 1.74 2. 2094 22 23 2.4 2 2. 2. 2.25 3272 3.225 3.36 3.40 304 320 4.48 4.2 4.141 4.4 4.741 5072 5.427 5.4 5.437 5. 1 6,341 64 8.1 68 25 11 .400 .140 4 50 1 12.10 13.55 16.1 1700 16.67 17. 208 .21 8.46 1, 21.4 24. 24 % 27 1.25 108 1.21 16 14 1.8 1. 1741 177 1.11 2.157 2.221 2.2 2. 2.427 2.772 2. 29 119 3.243 3.88 3 320 4.116 4.32 4.549 4.22 5112 5.418 5.74 8 $.214 649 7.114 12 96 798 1 10.25 11.17 12.17 1 27 11. 1311 14.42 16.8 17.45 13.04 21 26.6 17 4. 20 44.69 484 7 5 21 4 1.4 3.22 4.01 40 10.29 14.7 21. 1.41 46. 1 184 2 4.4 7.1 11.47 1.42 48 $ 4. 117.4 20 02 1.04 { Periods 1% 10 2 21@ 4 4. 8 5.101 1. 2020 3.Q 4.122 5.204 1.0 200 31 4.14 5.2 Future Value of Ordinary Annuity of $1 4% 6% % 1.00 1. 1. 1. 1.00 1000 2040 2.60 2. 2 2.00 3.12 15 14 215 3.248 3.27 4.248 4.310 46 4.440 4.50 4.57 5.416 555 57 5.1 5. 535 10% 1. 2.1 3.31 4.41 $1 12% 1.0 .12 3374 4.7 63 14% 1. 2.142 3.44 4.21 819 15% 1.0 2.150 3.47 4. $742 .44 6.18 7.214 226 10.46 8.4 2 2 12.16 11.48 9214 12.5g 121 2 .142 549 11.03 12.5 .94 11.49 12.1 7.1 54 10.2 11. 12 1 12.49 14.49 2 11. 13 16.13 7.18 .4 11.44 1 164 .116 12 12 14.7 17.55 .58 12 13.22 1 14 ,64 11.7 13 1. 200 1 10% 11 12 13 14 15 11.57 12.8 131 14 16.10 12.17 13.41 14 167 179 121 14.19 16 17 1.60 13.4 16 16 1 14.21 152 17.1 190 21.58 14.7 16 148 21. 16. 17 14 25.13 1 1 21. 24.21 27.16 17.56 .14 2 Q& 1. 21. 24.8 27 24.13 2 7.2 4 27.27 ,5 424 24. 4.5 42.50 4758 16 17 1 13 175 1 42 1981 2 164 1 21.41 24 24.30 0.18 21 2.41 5.12 21 277 2.13 .54 07 5. 21 27 4 4. 41 .46 41.45 41 46 1.16 4254 6 51.18 7.23 42.6 4. 85 44 12 1. 64 21 12.4 21 24 24.47 25.72 87 27 42 4 .46 4.43 17 4.8 51 41.43 44.50 42 4700 44. 1 844 1 0.42 8.46 .9 64.00 1.40 54 17 .50 14.8 112 14.8 10.4 1 1 11 18 1 142 4 X Reference .44 ? 9 7.214 10.4$ .214 1. 12.1 .142 849 11. 12.5 4 11.48 12.1 64 1020 14 11 12.49 1 14.49 3.20 11.00 13 613 .4 11.44 13.5 15.4 1 12. 14.7 17 12 13.28 16. 1934 11 13. 16. 78 12 12.18 11.46 1 11 12 13 14 15 117 12 131 14 18.10 12.17 13.41 14. 167 179 12 14.13 162 17 1 1.49 15 1 1.23 22 14.21 16 17.1 19 21. 14.7 16. 1 21. 16. 17 .14 28 5. 168 1 21 24.21 27.15 176 14 2 , 1. 21 24.8 27 1. 24.13 2.00 4 27.27 4 ,4 24 90 , 40.80 47 42.5 18 17 1 13 178 1 42 194 1864 1 21.41 24 24. .18 21. .41 5.12 8. 12 5.6 277 5.4 13 54 7 57 21 , 4. 41. 75 45 41.46 46, 41. 46.02 116 404 46 1.16 7. 8.5 44 098 12 ? 02 4 21 1.4 1 24 24.47 4.5 24 8 270 .42 .54 .46 4.42 .4 .51 41.48 44. 47 4 47 4. 44. 1 .44 1 8 .42 6.48 .11 4.70 4.00 1.40 .54 ,36 1. 14.8 112 1 14. 11 14 18 1 1 1 14.2 113 212.8 8 28.24 41.6 28 27 58 .13 .45 40.57 4071 42 46.22 47 44.31 47 497 27 8111 54.67 47 .44 16 64 4.4 , 5 4.46 6 4 14.2 1133 12 1503 1.7 1211 194 1130 14.2 1. 124.1 148 214.8 183 14.5 2413 20 25 2723 12.1 2467 71 2 44.7 4 4 .40 6.42 120.8 14. 16 259.1 4428 71 1,779 1342 4.996 64.46 4.5 112 1.7 20 45 5.1 1.164 2.40 7.21 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.) II Payback Plan A = years Plan B years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, XX%.) ARR Plan A % Plan B % Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (Complete all answer boxes. Enter a "O" for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal places, X.XXX. Use Plan A: Present Net Cash Inflow Annuity PV Factor (i=10%, n=10) PV Factor (i=10%, n=10) Years Value 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan A Calculate the NPV of Plan B. (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 B: Net Cash Present Annuity PV Factor (i=10%, n=10) PV Factor (i=10%, n=10) Years Inflow Value 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan B Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) Profitability index Plan A = Plan B 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 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 models. 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 alternative investments in present value terms and it also accounts for differences in the investments' initial cost. It has none of the weaknesses of the other models. Requirement 3. Which expansion plan should Lajos Company choose? Why? because it has a payback period, a ARR, a net present Lajos Company should invest in value, and a 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 This rate the company's hurdle rate of 10%