Heros operates a chain of sandwich shops, The company is considering two possible expansion plans, Plan A would open eight smaller shops at a cost of S8,640,000. Expected annual net cash inflows are $1,600,000 with zero residual value at the end of ten years. Under Plan B, Heros would open three larger shops at a cost of S8,540,000. 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 S900,000. Heros uses straight-line depreciation and requires an annual return of 10%. Click the icon to view the present value an ity factor table.) E Click the icon to view the present value factor table.) E Click the icon to view the future value annuity factor table.) (Click the icon to view the future value factor table.) Requirements 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 Heros choose? Why? Estimate Plan A's IRR. How does the IRR compare with the comp anys required rate of return? 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. an A years an B years Now compute the ARR (accounting rate of return) for both plans. (Round the percentages to the nearest tenth percent.) Plan A Plan B Next compute the NPV (net present value) under each plan. Begin with Plan A, then compute Plan B Round your answers to the nearest whole dollar and use parentheses or a minus sign to represent a negative NPW. Net present value of Plan A Net present value of Plan B Match the term with the strengths and weaknesses listed for each of the three capital budgeting models. is based on cash flows, can be used to assess profitability, and takes into account the time value of money. It has none of the weaknesses ofthe other two model is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money can be used to assess profitability, but it ignores the time value of money Requirement 2. Which expansion plan should Heros choose? Why? Recommendation: Invest in as the net present value. It also has a payback period