Glascoe 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 $1,600,000 with zero residual value at the end of ten years. Under Plan B, Glascoe would open three larger shops at a cost of $8,840,000. This plan is expected to generate net cash inflows of $1,300,000 per year for ten years, the estimated life of the properties. Estimated residual value is $1,000,000. Glascoe uses straight-line depreciation and requires an annual return of 10%. (Click the icon to view the present value annuity factor table.) (Click the icon to view the present value factor table.) (Click the icon to view the future value annuity factor table.) (Click the icon to view the future value factor table.) Read the requirements Requirement 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? Begin by computing the payback period for both plans. (Round your answers to one decimal place.) years - Reference Reference Plan A Plan B years Requirements -X Present Value of $1 Periods 1 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 Glascoe choose? Why? 3. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? 2 3 4 1% 0.990 1.970 2.941 3.902 4.853 2% 0.980 1.942 2.884 3.808 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 0.962 1.886 2.775 3.630 Present Value of Annuity of $1 5% 6% 8% 10% 12% 0.952 0.943 0.926 0.909 0.909 0.893 1.859 1.833 1.783 1.736 1.690 2.723 2.673 2.577 2.487 2.402 3.546 3.465 3.312 3.170 3.037 4.329 4.212 3.993 3.791 3.605 14% 0.877 1.647 2.322 2.914 3.433 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 Periods 1 2 3 4 5 196 0.990 0.980 0.971 0.961 0.951 296 0.980 0.961 0.942 0.924 0.906 396 496 0.971 0.962 0.943 0.925 0.915 0.889 0.888 0.855 0.863 0.822 596 0.952 0.907 0.864 0.823 0.784 696 0.943 0.890 0.840 0.792 0.747 8% 0.926 0.857 0.794 0.735 0.681 1096 0.909 0.826 0.751 0.683 0.621 1296 0.893 0.797 0.712 0.636 0.567 149 0.877 0.769 0.675 0.592 0.519 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 5 4.452 6 6 7 Print Done 5.795 6.728 7.652 8.566 9.471 7 8 9 10 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.623 5.206 5.747 6.247 6.710 4.355 4.868 5.335 5.759 6.145 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 8 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.630 0.583 0.540 0.500 0.463 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.456 0.400 0.351 0.308 0.270 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 9 10 11 12 13 14 15 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 12.134 11.348 10.635 9.9869.394 8.853 7.904 7.103 6.424 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.367 6.628 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.6066.811 5.453 5.660 5.842 6.002 6.142 5.029 5.197 5.342 5.468 5.575 4.656 4.793 4.910 5.008 5.092 4.327 4.439 4.533 4.611 4.675 11 12 13 14 15 0.896 0.804 0.887 0.788 0.879 0.773 0.870 0.758 0.861 0.743 0.722 0.650 0.701 0.625 0.681 0.601 0.661 0.577 0.642 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.429 0.397 0.368 0.340 0.315 0.350 0.319 0.290 0.263 0.239 0.287 0.257 0.229 0.205 0.183 0.237 0.195 0.162 0.135 0.208 0.168 0.137 0.137 0.112 0.182 0.145 0.116 0.093 0.160 0.125 0.099 0.078 0.140 0.108 0.084 0.065 20 25 30 40 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 22.023 19.523 17.41315.622 14.094 12.783 10.675 9.077 25.808 22.396 | 19.600 17.292 15.372 13.765 | 11.258 9.427 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 7.469 7.843 8.055 8.244 6.623 6.873 7.003 7.105 5.929 6.097 6.177 6.233 5.353 5.467 5.517 5.548 4.870 4.948 4.979 4.997 20 25 30 40 0.820 0.673 0.780 0.610 0.742 0.552 0.672 0.453 0.554 0.478 0.412 0.307 0.456 0.375 0.308 0.208 0.377 0.295 0.231 0.142 0.312 0.233 0.174 0.097 0.215 0.146 0.099 0.046 0.149 0.092 0.057 0.022 0.104 0.059 0.033 0.011 0.073 0.038 0.020 0.005 0.051 0.037 0.026 0.024 0.016 0.010 0.012 0.007 0.007 0.004 0.003 0.001 0.001