Glascoe Inc. operales a chain of doughnut shops. The company is considering two possible expansion plans. Plan A would ooen eight smaller shops at a cost of $8,940, coo. Expecled annual not cash intows are $1,550,000 with zero residual value at the end of ten years. Uncer Plan B, Glascoe would opon thee larger shops at a cost of 56,740,000. This plan is axpected to generate not Cash infows of $1,100,000 per year for ten years, the estimated life of the properties. Estimaled residual value is $1,100,000, Glascoe usos straight-line depreciation and required an arnual return of 10%. (Click the icon to view the present value annuity tactor table.) (Cick the icon to view the present value factor table.) (Click the icon to view the future value annulty factor table.) (Click the icon to view the future valus factor tabie.) Read the teguirnments. Requirement 1. Compute the payback period, the ARR, and the NPV of these two plans. What are the strengths and weaknestses of these capital budgeing rodeas? Begin by computing the payback period for both plans. (Round your answers to one decimal place.) Pian A (in years) Plan B (in years) Now compute the ARR (accounting rate of retum) for both plans. (Round the percentages to the nearest tecth percent) PianA Plan 8 Next conpite the NPY (net present value) under sach plan. Begin with Plan A. then compule Plan B. (Round your answers to the nearest whole folur and use parentheses or a minus sign to represont a negative NPV.) Not procent value of Plan A Net prosent value of Plan B Requirement 2. Which expansion plan should Glascoe choose? Why? Recommendation: Invest in It has the net present value. It also has a payback period. Requirement 3. 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%. Present Value of Annuity of $1 \begin{tabular}{|l|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline Periods & 1% & 2% & 3% & 4% & 5% & 6% & 8% & 10% & 12% & 14% & 16% & 18% & 20% \\ \hline Period 1 & 0.990 & 0.980 & 0.971 & 0.962 & 0.952 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 & 0.862 & 0.847 & 0.833 \\ Period 2 & 1.970 & 1.942 & 1.913 & 1.886 & 1.859 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 & 1.605 & 1.566 & 1.528 \\ Period 3 & 2.941 & 2.884 & 2.829 & 2.775 & 2.723 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 & 2.246 & 2.174 & 2.106 \\ 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 & 2.589 \\ Period 5 & 4.853 & 4.713 & 4.580 & 4.452 & 4.329 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 & 3.274 & 3.127 & 2.991 \\ Period 6 & 5.795 & 5.601 & 5.417 & 5.242 & 5.076 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 & 3.685 & 3.498 & 3.326 \\ Period 7 & 6.728 & 6.472 & 6.230 & 6.002 & 5.786 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 & 4.039 & 3.812 & 3.605 \\ 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 & 3.837 \\ Period 9 & 8.566 & 8.162 & 7.786 & 7.435 & 7.108 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 & 4.607 & 4.303 & 4.031 \\ Period 10 & 9.471 & 8.983 & 8.530 & 8.111 & 7.722 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 & 4.833 & 4.494 & 4.192 \\ 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 & 4.327 \\ Period 12 & 11.255 & 10.575 & 9.954 & 9.385 & 8.863 & 8.384 & 7.536 & 6.814 & 6.194 & 5.660 & 5.197 & 4.793 & 4.439 \\ 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 & 4.533 \\ Period 14 & 13.004 & 12.106 & 11.296 & 10.563 & 9.899 & 9.295 & 8.244 & 7.367 & 6.628 & 6.002 & 5.468 & 5.008 & 4.611 \\ Period 15 & 13.865 & 12.849 & 11.938 & 11.118 & 10.380 & 9. \end{tabular} Present Value of $1 \begin{tabular}{|l|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline Periods & 1% & 2% & 3% & 4% & 5% & 6% & 8% & 10% & 12% & 14% & 16% & 18% & 20% \\ \hline Period 1 & 0.990 & 0.980 & 0.971 & 0.962 & 0.952 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 & 0.862 & 0.847 & 0.833 \\ Period 2 & 0.980 & 0.961 & 0.943 & 0.925 & 0.907 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 & 0.743 & 0.718 & 0.694 \\ Period 3 & 0.971 & 0.942 & 0.915 & 0.889 & 0.864 & 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 & 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 & 0.519 & 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 & 0.456 & 0.410 & 0.370 & 0.335 \\ Period 7 & 0.933 & 0.871 & 0.813 & 0.760 & 0.711 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 & 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 & 0.592 & 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 & 0.191 & 0.162 \\ Period 11 & 0.896 & 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 & 0.642 & 0.555 & 0.481 & 0.417 & 0.315 & 0.239 & 0.183 & 0.1 \end{tabular} Euthirn V/alua of A nnuitu of $1 Future Value of $1