Has Beans 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 $8,740,000. Expected annual net cash inflows are $1,750,000 with zero residual value at the end of ten years. Under Plan B, Has Beans would open three larger shops at a cost of $8,640,000. 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 $975,000. Has Beans uses straight-line depreciation and requires an annual return of 10%. (Click the icon to view the present value annuity factor table.) 2 (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.) 5.0 years Plan A Plan B 6.6 years Now compute the ARR (accounting rate of return) for both plans. (Round the percentages to the nearest tenth percent.) Plan A % Plan B x Reference Reference 2% 12% Periods 4% 20% Periods 1 2 3 1% 1.000 2.010 3.030 4.060 1.000 2.020 3.060 3% 1.000 2.030 3.091 496 1.000 2.040 3.122 4.246 5.416 Future Value of Annuity of $1 5% 6% 8% 10% 1.000 1.000 1.000 1.000 2.050 2.060 2.080 2.100 3.153 3.184 3.246 3.310 4.310 4.375 4.506 4.641 5.526 5.637 5.867 6.105 1.000 2.120 3.374 4.779 6.353 14% 1.000 2.140 3.440 16% 1.000 2.160 3.506 5.066 6.877 18% 1.000 2.180 3.572 5.215 7.154 20% 1.000 2.200 3.640 5.368 7.442 1 2 3 4 1% 0.990 1.970 2.941 3.902 2% 0.980 1.942 2.884 396 0.971 1.913 2.829 3.717 4.580 0.962 1.886 2.775 3.630 Present Value of Annuity of $1 5% 6% 8% 10% 0.952 0.943 0.926 0.909 1.859 1.833 1.783 1.736 2.723 2.673 2.577 2.487 3.546 3.465 3.312 3.170 4.329 4.212 3.993 3.791 12% 0.893 1.690 2.402 3.037 3.605 14% 0.877 1.647 2.322 2.914 3.433 16% 0.862 1.605 2.246 2.798 18% 0.847 1.566 2.174 2.690 3.127 0.833 1.528 2.106 2.589 2.991 4 4.122 4.184 4.921 3.808 5 5.101 5.204 5.309 6.610 5 4.853 4.713 4.452 3.274 6 6.308 8.115 8.977 9.930 6 4.355 5.601 6.472 4.917 5.582 4.623 5.206 7 7.434 10.089 3.326 3.605 11.414 7 6.152 7.214 8.286 9.369 10.462 6.468 7.662 8.892 10.159 11.464 6.633 7.898 9.214 10.583 12.006 8 6.802 8.142 9.549 11.027 12.578 5.795 6.728 7.652 6.975 8.394 9.897 11.491 13.181 8.583 7.336 8.923 10.637 12.488 14.487 5.417 6.230 7.020 7.716 9.487 11.436 13.579 15.937 8.536 10.730 13.233 16.085 19.337 9.442 12.142 15.327 19.086 23.521 4.111 4.564 4.968 3.685 4.039 4.344 8 7.325 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 6.210 12.300 14.776 17.549 5.747 12.916 16.499 20.799 25.959 14.240 17.519 21.321 3.837 3.889 4.288 4.639 4.946 5.216 4.868 5.335 5.759 6.145 3.498 3.812 4.078 4.303 4.494 9 9 8.566 7.786 6.802 9.755 10.950 5.328 4.607 8.162 8.983 6.247 6.710 4.031 4.192 10 10 9.471 8.530 7.360 5.650 4.833 11 11 4.656 12.169 13.412 12 13 11.567 12.683 13.809 14.947 12.808 14.192 15.618 12 14.207 15.917 17.713 13.486 15.026 16.627 18.292 20.024 14.972 16.870 18.882 21.015 23.276 18.531 21.384 24.523 16.645 18.977 21.495 24.215 27.152 14.680 20.655 24.133 28.029 32.393 37.280 23.045 27.271 32.089 37.581 43.842 25.733 30.850 36.786 43.672 51.660 28.755 34.931 42.219 50.818 60.965 32.150 39.581 48.497 59.196 72.035 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 9.986 9.394 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 11.11810.380 9.712 8.559 7.606 6.811 5.029 5.197 5.342 5.468 5.453 5.660 5.842 6.002 6.142 4.327 4.439 4.533 13 4.793 4.910 5.008 5.092 14 15.974 19.599 14 17.086 18.599 27.975 31.772 4.611 4.675 15 16.097 17.293 21.579 15 5.575 20 25 30 40 45.762 73.106 22.019 28.243 34.785 48.886 24.297 32.030 40.568 60.402 26.870 36.459 47.575 75.401 29.778 41.646 56.085 95.026 33.066 47.727 66.439 36.786 54.865 79.058 154.762 57.275 98.347 164.494 442.593 72.052 91.025 115.380 146.628 186.688 133.334 181.871 249.214 342.603 471.981 241.333 356.787 530.312 790.948 1,181.882 767.091 1,342.0252,360.7574,163.2137,343.858 20 25 30 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 22.023 19.52317.413 15.622 14.094 12.783 10.675 9.077 7.843 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 32.835 27.355 23.115 | 19.793 17.159 15.046 11.925 9.779 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 4.997 113.283 259.057 120.800 40 Print Done Print Done Reference - i Reference he Present Value of $1 Future Value of $1 Periods 3% 49% 6% 20% 6% 1 2 3 1% 0.990 0.980 18% 1.180 5% 0.952 0.907 0.864 Periods 1 2 4% 1.040 1.082 2% 0.980 0.961 0.942 0.924 0.906 10% 0.909 0.826 0.751 12% 0.893 0.797 0.712 0.636 0.971 0.943 0.915 0.888 0.863 1.060 1.124 14% 1.140 1.300 0.962 0.925 0.889 0.855 0.822 8% 0.926 0.857 0.794 0.735 0.681 18% 0.847 0.718 0.609 0.943 0.890 0.840 0.792 0.747 1.392 14% 0.877 0.769 0.675 0.592 0.519 169 0.862 0.743 0.641 0.552 0.476 1% 1.010 1.020 1.030 1.041 1.051 5% 1.050 1.103 1.158 0.833 0.694 0.579 0.482 0.402 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 10% 1.100 1.210 1.331 8% 1.080 1.166 1.260 1.360 1.469 0.971 12% 1.120 1.254 1.405 1.574 1.762 16% 1.160 1.346 1.561 1.811 2.100 20% 1.200 1.440 1.728 2.074 2.488 3 1.125 1.191 1.482 1.643 4 0.823 0.683 0.516 4 1.170 1.216 1.262 1.464 1.689 0.961 0.951 5 1.939 2.288 0.784 0.621 0.567 0.437 5 1.217 1.276 1.338 1.611 1.925 6 0.888 0.837 0.746 0.630 0.410 0.942 0.933 1.587 1.974 2.195 2.986 0.370 0.314 7 6 7 0.871 0.813 0.354 0.507 0.452 0.404 2.211 2.502 3.583 0.583 0.540 8 0.790 0.760 0.731 0.703 0.676 0.705 0.665 0.627 0.592 0.558 0.923 0.914 0.905 0.564 0.513 0.467 0.424 0.386 0.853 0.837 0.820 0.305 0.711 0.677 0.645 0.614 0.789 0.766 0.744 0.266 0.456 0.400 0.351 0.308 0.270 0.335 0.279 0.233 0.194 0.162 1.062 1.072 1.083 1.094 1.105 8 9 1.126 1.149 1.172 1.195 1.219 2.436 2.826 3.278 3.803 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 9 1.772 1.949 2.144 2.358 2.594 1.714 1.851 1.999 2.159 2.700 3.185 3.759 4.435 5.234 0.500 0.361 0.263 0.227 2.476 2.773 3.106 0.225 0.191 2.853 3.252 3.707 4.300 5.160 6.192 10 0.463 0.322 10 4.411 11 0.804 11 2.853 3.479 6.176 12 4.226 4.818 0.650 0.625 0.601 3.138 0.896 0.887 0.879 0.870 3.896 0.350 0.319 0.290 7.288 0.722 0.701 0.681 0.661 0.642 0.585 0.557 0.530 0.505 0.481 13 0.527 0.497 0.469 0.442 0.417 0.429 0.397 0.368 0.340 0.315 0.788 0.773 0.758 0.743 0.287 0.257 0.229 0.205 0.183 0.237 0.208 0.182 0.160 0.140 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 12 13 0.135 0.112 0.093 0.078 0.065 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.601 1.665 1.732 1.801 1.710 1.796 1.886 1.980 2.079 5.117 5.936 6.886 1.898 2.012 2.133 2.261 2.397 2.332 2.518 2.720 2.937 3.172 4.363 5.492 14 7.430 8.916 10.699 12.839 15.407 0.577 0.263 3.452 3.797 4.177 14 7.988 4.887 5.474 8.599 10.147 11.974 6.261 7.138 15 0.861 0.555 0.239 15 9.266 20 1.220 0.149 0.092 2.191 20 25 3.207 0.820 0.780 0.742 0.673 0.610 6.727 10.835 0.554 0.456 0.478 0.375 0.412 0.308 0.307 0.208 13.743 26.462 0.377 0.295 0.231 0.142 2.666 0.312 0.233 0.174 0.097 0.215 0.146 0.099 0.046 0.104 0.059 0.033 0.011 0.037 0.016 0.007 0.073 0.038 0.020 0.005 0.051 0.024 0.012 0.003 0.026 0.010 0.004 0.001 1.806 2.094 2.427 1.486 1.641 1.811 2.208 25 30 40 1.282 1.348 1.489 30 40 0.552 0.057 2.653 3.386 4.322 7.040 4.661 6.848 10.063 21.725 9.646 17.000 29.960 93.051 19.461 40.874 85.850 378.721 4.292 5.743 10.286 27.393 38.338 62.669 95.396 143.371 237.376 750.378 1,469.772 50.950 3.243 4.801 0.672 0.453 0.022 0.001 3.262 17.449 45.259 188.884 Print Done Print Done