Happy Bean Inc operates a chain of doughnut shops. The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,840,000 Expected annual net cash inflows are $1,600,000 with zero residual value at the end of ten years. Under Plan B, Happy Bean would open three larger shops at a cost of $8,540,000. This plan is expected to generate net cash inflows of $1,150,000 per year for ten years, the estimated life of the properties. Estimated residual value is $900.000. Happy Bean 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 future value annuity factor table.) Read the requirements (Click the icon to view the present value factor table.) (Click the icon to view the future value factor table) 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.) Plan A (in years) Plan B (in years) Present Value of Annuity of $1 Periods 1% Period 1 Period 2 2% 3% 4% 5% 6% 0.990 0.980 0.971 0.962 0.952 0.943 8% 10% 12% 14% 0.926 0,909 0.893 0.877 16% 18% 20% 0.862 0.847 0.833 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1736 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 2402 2.322 2.246 2.174 2.106 3.902 3.808 3.717 3.630 4.853 4,713 4.580 4.452 5.795 5.601 5.417 5.242 6.472 6.230 6.002 7.325 7.020 6.733 Period 4 Period 5 Period 6 Period 7 6.728 5.786 5.582 5 206 4.868 4.564 Period 8 7.652 6.463 6.210 5.747 5.335 4.968 Period 9 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.759 5.328 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 Period 13 12.134 11.348 10 635 9.986 9.394 8.853 7.904 7.103 6.424 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.367 6.628 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.606 6.811 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 4.329 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.991 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 4.288 4.039 3.812 3.605 4.639 4.344 4.078 4.946 4.607 4.303 4.031 5.216 4.833 4.494 4.192 3.837 5.453 5.029 5.660 5.197 4.656 4.793 4.439 4.327 5.842 5.342 4.910 4.533 6 002 6.142 5.575 5.468 5.008 4.611 5.092 4.675 Period 20 18.046 16 351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 Period 25 22.023 19.523 17 413 15.622 14.094 12.783 10.675 9.077 7.843 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9427 8.055 7,003 6.177 6.097 5.467 4.948 5.517 Period 40 32.835 27 355 23.115 19.793 17.159 15.046 11 925 9.779 8.244 4.979 7.105 6.233 5.548 4.997 6.623 6.873 5.929 5.353 4.870) Present Value of $1 Periods 1% 2% 3% 4% Period 1 0.990 0.980 0.971 0.962 Period 2 0.980 0.961 0.943 0.925 0.907 Period 3 0.971 0.942 0.915 0.889 0.864 Period 4 0.961 0.924 0.888 0.855 0.823 Period 5 0.951 0.906 0.863 0.822 0.784 5% 6% 8% 10% 0.952 0.943 0.926 0.909 0.890 0.857 0.826 0.840 0.794 0.751 0.792 0.735 0.683 0.747 0.681 0.621 Period 6 0.942 0.888 0.837 0.790 0.746 Period 7 0.933 0.871 0.813 0.760 0.711 Period 8 0.923 0.853 0.789 0.731 0.677 Period 91 0.914 0.837 0.766 0.703 0.645 Period 10 0.905 0.820 0.744 0.676 0.614 Period 11 0.896 0.804 0.722 Period 12 0.887 0.788 0.701 Period 13 0.879 0.773 0.681 0.601 12% 14% 16% 18% 20% 0.893 0.877 0.862 0.847 0.833 0.797 0.769 0.743 0.718 0.694 0.712 0.675 0.641 0.609 0.579 0.636 0.592 0.552 0.616 0.482 0.567 0.519 0.476 0.437 0.402 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 0.625 0.557 0.497 0397 0.319 0.530 0.469 0.368 0.290 0.257 0.208 0.168 0.137 0.112 Period 14 0,870 0758 0.661 0.577 0.505 0.442 0.340 0.263 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 Period 20 0.820 0673 0.554 0.456 0.377 0.312 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 lv Period 30 0.742 0552 0.412 0.308 0.231 Period 40 0.672 0.453 0.307 0.208 0.142 0.174 0.097 0229 0.182 0.145 0.116 0.093 0.205 0.160 0.125 0.099 0.078 0.183 0.140 0.108 0.084 0.065 0215 0.149 0.104 0.073 0.051 0.037 0.026 0.146 0.092 0.059 0.038 0.024 0.016 0.010 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0046 0.022 0.011 0.005 0.003 0.001 0.001 Future Value of Annuity of $1 Periods Period 1 1% 2% 3% 4% 1.000 1.000 1.000 1.000 Period 21 2010 2.020 2.030 2.040 2.050 Period 3 3.030 3.060 3.091 Period 4 4.060 4.122 4 184 Period 5 5.101 5.204 3.122 3.153 4.246 4.310 5.309 5416 5.526 5% 6% 8% 10% 12% 1.000 1.000 1.000 1.000 1.000 1.000 2.060 2.080 2.100 2.120 3.184 3.246 3.310 3.374 3.440 4:375 4.506 4.641 4.779 4.921 5.066 5.637 5.867 6.105 6.353 6.610 6.877 7.154 14% 16% 18% 20% 1.000 1.000 1.000 2.140 2.160 2.180 2.200 3.506 3.572 3.640 5.215 5.368 7.442 Period 6 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 Period 7 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 Period 8 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11 436 12.300 8.536 8.977 9.442 10.730 11.414 13.233 14.240 9.930 12.142 12.916 15.327 16.499 Period 9 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 Period 10 10 462 10 950 11.464 12.006 12.578 13.181 14.487 15.937 17 549 19.337 21.321 23.521 25.959 Period 11 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 Period 12 12 683 13.412 14.192 15.026 15.917 16.870 Period 13 13.809 14.680 15.618 16.627 17.713 18.882 Period 14 14.947 15.974 17 086 18 292 19,599 21.015 Period 15. 16.097 17 293 18.599 20.024 18.977 21.384 24.133 21.495 24.623 28.029 24.215 27 975 21.579 23.276 27.152 31.772 37.280 27.271 30.850 34.931 39.681 32.089 36.786 42.219 48.497 32.393 37.581 43.672 50.818 59.196 43.842 51.660 60.965 72.035 Period 201 22.019 24 297 26 870 29.778 33.066 Period 25 28 243 32 030 36 459 41.646 47 727 Period 30 34.785 40.568 47.575 56.085 66 439 36.786 45.762 57.275 72.052 54 865 73.106 98.347 133 334 79.058 113.283 164 494 241 333 91.025 116.380 146 628 186 688 181.871 249.214 342.603 471.981 356 787 530.312 790.948 1,181.882 Period 40 48 886 60 402 75 401 95.026 120 800 154 762 259 057 442.593 767.091 1,342.025 2,360 757 4.163.213 7,343 858 Future Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 12% Period 1 1.010 1.020 1,030 1.040 1.050 1.060 1.080 Period 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 Period 3 1.030 1.061 1.093 1.125 1.158 1.191 Period 4 1.041 1.082 1.126 1.170 1.216 1.262 Period 5 1,051 1.104 1.159 1.217 1276 1.338 10% 1.100 1.120 1.210 1.254 1.260 1.331 1.405 1,482 1.561 1.360 1.464 1.574 1.689 1.811 1.469 1.611 1.762 1.925 2.100 2.288 14% 16% 18% 20% 1.140 1.160 1.180 1.200 1.300 1.346 1.392 1.440 1.643 1,728 1.939 2.074 2.488 Period 6 1.062 1,126 1.194 1.265 1.340 Period 7 1,072 1.149 1.230 1.316 1.407 Period 8 1.083 1.172 1.267 1.369 1477 Period 9 1.094 1.195 1:305 1.423 1.551 Period 10 1.105 1.219 1.344 1.480 1629 1.689 1.999 1.791 2.159 1.116 Period 11 Period 12 1.127 Period 13 1.138 Period 14 1.149 Period 15 1:161 Period 201 1.220 1.486 1.806 2.191 2653 Period 25 1.282 1.641 2.094 2.666 3.386 Period 30 1.348 1.811 2.427 3.243 Period 40 1489 2.208 1.243 1.384 1.268 1.294 1.469 1.539 1710 1.426 1.601 1.796 1.665 1.886 1.319 1.513 1.346 1.732 1.980 1.558 1.801 2079 1.898 2.332 2.853 2012 2.518 3.138 2 133 2.720 2.261 2.937 2.397 3.172 1.419 1.587 1.772 1.974 2.195 2.436 2.700 2.986 1.504 1.714 1.949 2211 2.502 2.826 3.185 3.583 1.594 1.851 2 144 2.476 2.853 3.278 3.759 4.300 2.358 2.773 3.252 3.803 4.435 5.160 2.594 3.106 3.707 4.411 3.479 4.226 5.117 5.234 6.192 6.176 7.430 3.452 3.797 4.887 6.261 7.988 10.147 4.177 5.474 7.138 9.266 11.974 3.896 4.818 5.936 7.288 4.363 5.492 6.886 8.916 8.599 10.699 12.839 15.407 3.207 4.292 4.661 6.727 9.646 6.848 13.743 19.461 27.393 38.338 4.322 5.743 10 063 3.262 4.801 7040 10 286 10.835 17.000 26.462 40 874 17.449 29.960 50.950 85.850 237.376 21.725 45 259 93 051 188 884 378.721 750 378 1,469.772 62.669 95.396 143.371