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Question Help @ P26-31A (similar to) Lapos Company operates a chain of sandwich shops. (Click the icon to view addiional information.) Read the (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Expected annual net cash inflowPayback Amount invested 8,425,000 8,100,000 1,600,000 1,020,000 5.3 Plan A $ Plan B S years 7.9 years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, XX% Average annual operating income1 Plan A $ Plan B $ Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (Complete all answer Average amount invested 4,212,500 4,540,000 ARR 18.0 % 6.8 % 757,500 308,000 baxes. Enter a "0 for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal places, Xxoox. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Annuity PV Factor PV Factor Present Years inflow (i=7%, n-10) (-7%, n-10) Value 1-10 Present value of annuity Present value of residual value Total PV of cash inflows 10 0 Initial Investment Enter any number in the edit fields and then click Check Answer. 6 Pemsaining Clear All Check Answer MacBoo (Click the icon to view Present Value of $1 tabl mpany operates a chain of sandwich shops. k the icon to view additional information.) requirements (Click the icon to view Present Value of Ordina Annuity of $1 table.) 2 (Click the icon to view Future Value of $1 table. (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Payback -X |5.3 year 7.9 year 1 More Info ent, X.X% eth The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,425,000. Expected annual net cash inflows are ARR $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lapos Company would open three larger shops at a cost of $8,100,000. This plan is expected to generate net cash inflows of $1,020,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan 18.0 % 6.8 % the B is $980,000. Lapos Company uses straight-line depreciation and requires an nter annual return of 7%. answer to three Print Done ent Value Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment number in the edit fields and then click Check Answer ning- 1 Clear All Check Answer MacBo / Expected annual net cash inflowP Amount invested i Requirements te th 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. 2. What are the strengths and weaknesses of these capital budgeting methods? 3. Which expansion plan should Lapos Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's 18. 6.8 te the required rate of retum? l plac Print Done rese Valu 0 Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment ny number in the edit fields and then click Check Answer ts aining Glear All Check Answer Mac Question Help @ P26-31A (similar to) Lapos Company operates a chain of sandwich shops. (Click the icon to view addiional information.) Read the (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Expected annual net cash inflowPayback Amount invested 8,425,000 8,100,000 1,600,000 1,020,000 5.3 Plan A $ Plan B S years 7.9 years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, XX% Average annual operating income1 Plan A $ Plan B $ Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (Complete all answer Average amount invested 4,212,500 4,540,000 ARR 18.0 % 6.8 % 757,500 308,000 baxes. Enter a "0 for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal places, Xxoox. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Annuity PV Factor PV Factor Present Years inflow (i=7%, n-10) (-7%, n-10) Value 1-10 Present value of annuity Present value of residual value Total PV of cash inflows 10 0 Initial Investment Enter any number in the edit fields and then click Check Answer. 6 Pemsaining Clear All Check Answer MacBoo (Click the icon to view Present Value of $1 tabl mpany operates a chain of sandwich shops. k the icon to view additional information.) requirements (Click the icon to view Present Value of Ordina Annuity of $1 table.) 2 (Click the icon to view Future Value of $1 table. (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Payback -X |5.3 year 7.9 year 1 More Info ent, X.X% eth The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,425,000. Expected annual net cash inflows are ARR $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lapos Company would open three larger shops at a cost of $8,100,000. This plan is expected to generate net cash inflows of $1,020,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan 18.0 % 6.8 % the B is $980,000. Lapos Company uses straight-line depreciation and requires an nter annual return of 7%. answer to three Print Done ent Value Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment number in the edit fields and then click Check Answer ning- 1 Clear All Check Answer MacBo / Expected annual net cash inflowP Amount invested i Requirements te th 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. 2. What are the strengths and weaknesses of these capital budgeting methods? 3. Which expansion plan should Lapos Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's 18. 6.8 te the required rate of retum? l plac Print Done rese Valu 0 Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment ny number in the edit fields and then click Check Answer ts aining Glear All Check Answer Mac
