Lajos Company operates a chain of sandwich shops (Click the icon to view additional information.) (Click the icon to view Present Value of $1 table.) Read the requirements (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.) Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. Calculate the payback for both plans. (Round your answers to one decimal place, X.X.) Expected annual net cash inflow 1,525,000 $ Amount invested 8,500,000 8,150,000 Plan A Plan B 1$ 1 $ Payback 5.6 years 7.9 years 1,030,000 Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Average annual operating income Average amount invested ARR Plan A 675,000 / $ 4,250,000 Plan B 335,000 4,675,000 7.2% 15.9 % Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (Complete all answer boxes. Enter a "0" for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Inflow Annuity PV Factor (i=10%, n=10) PV Factor (i=10%, n=10) Present Value Years 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows Initial Investment Net present value of Plan A More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,500,000. Expected annual net cash inflows are $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lajos Company would open three larger shops at a cost of $8,150,000 This plan is expected to generate net cash inflows of $1,030,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,200,000. Lajos Company uses straight-line depreciation and requires an annual return of 10%. Print Print Done Done Requirements 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 Lajos Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done 0 Reference Periods 5% 0.952 0.907 0.864 0.823 0.784 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.746 0.711 0.677 0.645 0.614 0.585 2% 3% 0.980 0.971 0.961 0.943 0.942 0.915 0.924 0.888 0.906 0.863 0.888 | 0.837 0.871 0.813 0.853 0.789 0.837 0.766 0.820 0.744 0.804 0.722 0.788 0.701 0.773 0.681 0.758 0.661 0.743 0.642 0.728 0.623 0.714 0.605 0.700 0.587 0.686 0.570 0.673 0.554 0.660 0.538 0.647 0.522 0.634 0.507 0.622 0.492 0.610 0.478 0.598 0.464 0.586 0.450 0.574 0.437 0.424 0.552 0.412 0.453 0.307 0.372 0.228 0.557 4% 0.962 0.925 0.889 0.855 0.822 0.790 | 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.439 0.422 0.406 0.390 0.375 0.361 0.347 0.333 0.321 0.308 6% 0.943 0.890 0.840 | 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 0.394 0.371 Present Value of $1 7% 8% 9% 10% 0.935 0.926 0.917 0.909 0.873 0.857 0.842 0.826 0.816 0.794 0.772 0.751 0.763 0.735 0.708 0.683 0.713 | 0.681 0.650 0.621 0.6660.630 0.596 0.564 0.623 0.583 0.547 0.513 0.582 0.540 0.502 0.467 0.544 0.500 0.460 0.424 0.508 0.463 0.422 0.386 0.475 0.429 0.388 0.350 0.444 0.397 0.356 0.319 0.415 0.368 0.326 0.290 0.388 0.340 0.299 0.263 0.362 0.315 0.275 0.239 0.339 0.292 0.252 0.218 0.317 0.270 0.231 0.198 0.296 0.250 0.212 0.180 0.277 0.232 0.194 0.164 0.258 0.215 0.178 0.149 0.242 0.199 0.1640.135 0.226 0.184 0.150 0.123 0.211 0.170 0.138 0.112 0.1970.158 0.126 0.102 0.184 0.146 0.116 0.092 0.135 0.106 0.084 0.161 0.125 0.098 0.076 0.116 0.090 0.069 0.141 0.107 0.082 0.063 0.131 0.099 0.075 0.057 0.067 0.046 0.032 0.022 0.034 0.021 0.013 0.009 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0.377 0.359 0.342 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.093 0.083 0.074 0.066 0.059 0.053 14% 0.877 0.769 0.675 | 0.592 0.519 0.456 | 0.400 0.351 | 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.064 0.056 0.049 0.043 0.038 0.033 0.029 0.026 0.022 0.020 0.005 0.001 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.081 0.070 0.061 0.053 0.046 0.040 0.035 0.030 0.026 0.023 0.020 0.017 0.015 0.004 0.001 16% 18% 20% 0.862 0.847 0.833 0.743 0.7180.694 0.641 0.609 0.579 0.552 0.516 0.482 0.476 0.437 0.402 0.410 0.370 0.335 0.354 0.314 0.279 0.305 0.266 0.233 0.263 0.225 0.194 0.227 0.191 0.162 0.195 0.162 0.135 0.168 0.137 0.112 0.145 0.116 0.093 0.125 0.099 0.078 0.108 0.084 0.065 0.093 0.071 0.054 0.080 0.060 0.045 0.069 0.051 0.038 0.060 0.043 0.031 0.051 0.037 0.026 0.044 0.031 0.022 0.038 0.026 0.018 0.033 0.022 0.015 0.028 0.019 0.013 0.024 0.016 0.010 0.021 0.014 0.009 0.018 0.011 0.007 0.0160.010 0.006 0.014 0.008 0.005 0.012 0.007 0.004 0.003 0.001 0.001 0.001 0.836 0.350 0.326 0.828 0.820 0.811 0.803 0.795 0.788 0.780 0.772 0.764 0.757 0.749 0.742 0.672 0.608 0.331 0.312 0.294 0.278 0.262 0.247 0.233 0.220 0.207 0.196 0.185 0.174 0.172 0.310 0.295 0.281 0.268 0.255 0.243 0.231 0.142 0.087 0.047 0.150 0.563 0.042 0.037 0.033 0.208 0.097 0.011 0.141 0.054 0.003 i Reference Present Value of Ordinary Annuity of $1 Periods 3.312 3.837 4.432 4.51 1% 20138 | 4 | 5 | 68 7% | | 99 | 10 | 12 | 1481 1581 16 | 188 | 2008 0930 0980 | 0971 | 0962 | 0952 | 0.343 | 0935 | 0926 | 0.217 | 0.30 | 0.893 | 0.877 | 0.870 0.862 1 0847 | 0.833 1.970 1.342 | 1.913 | 1.286 | 1.253 1. 1.208 | 1. 72 | 1.759 | 1.736 | 1.590 | 1.547 | 1.626 | 1505 11.566 | 1.528 2.941 2.288 | 2.829 | 2.775 | 2.723 | 2.573 2.624 | 2577 2531 2.87 | 2402 | 2.322 | 2.288 | 2.246 | 2.174 12.106 3.302 3808 3717 3.530 | 3546 | 3.65 3.387 3.240 3.170 | 3.037 2.214 12.255 2.733 | 2.690 2.588 4.253 4713 14.580 452 | 4.323 4.212 4.100 3993 3.890 3.31] 3.505 333 3.352 3272 3.127 2.991 5.795 5.501 | 5.417 | 5242 5.076 | 4917 4.767 | 4.623 4.486 4.355 | 4.111 | 3. 2 3.784 | 3.625 | 3.498 3.325 6.728 6.72 | | 6.230 6.002 5.786 | 5.582 | 5388 | 5.206 5.033 4.268 | 4.554 | 4.288 4.160 4.038 | 3.312 3.605 7.652 7.325 | 7.020 6.733 6.463 | 5.210 | 5971 | 5.747 5.535 15.335 | 4.368 4.633 4.87 4.3.2 4.073 8.566 | 8.162 | 7.786 17.35 7.108 | 6.802 | 6.515 | 6.247 5.995 | 5.755 | | 5.328 | 4.946 4.772 4.607 4.30 ) 4.031 3471 18.983 | 8530 | 8.111 7.722 | 7.360 7.024 6.710 6-18 6.145 15.650 | | 5.216 5.019 4.883 4.92 | 4.192 10.368 | 9.787 | 19.253 | 3.750 | 3.306 | 7.887 | 7.99 7.139 6.205 | 6.95 | 5.938 | 5453 5.234 5.023 4.656 4.327 11.255 | 10.575 | 19.354 9.385 | 3.83] 8.384 7.943 7.536 7.161 16.214 | 6.194 5.660 5.21 5.197 4. 73 12.134 | 11.348 | 10.635 | 3.986 | 3.39. | 8.253 8.358 | 7.302 7.487 7.18 | 6.24 5.8.2 5583 5.3.2 4.210 4.533 13.004 | 12.106 | 11.296 | 10.563 | 9.899 | 2.235 | 8.745 | 8.222 7.786 | 367 | 6.628 5.002 | 5.724 | 5.468 | 5.008 13.865 | | 12.89 | 11.938 | 11.118 | 10.380 | 3712 | 3.108 | 8.559 2.061 7.506 | 6.811 6.142 5.847 5.575 5.092 4.675 14.718 13.578 | 12.561 | 11.652 | 10.88 | 10.116 | | 9.47 || 18.251 8.313 1.822 | 6.374 6.255 5.954 5.568 15.162 | 4.730 1.292 | 13.166 | 12.166 11.274 | 10477 9.763 | 9.122 8.544 2.022 | 7.120 6.373 6.047 5.74 5.222 | 4.775 16.398 1992 13.754 | 12.559 11.590 10.828 | 10.058 | 3.372 8.756 8.2011 7.250 6.467 6.128 5.218 5.273 | 4.812 17.225 15.578 | 14.324 | 13.134 12.085 11.158 10.335 | 2.50. 8.950 8.365 | 17.366 6.550 6.198 5.877 | 5.316 | 4.8LL 18.046 16.351 14.87 13.590 12.462 11.470 10.594 9.218 3.123 851 7.462 5.523 6.258 5.323 5. 33 ) 4.870 18.857 17.01 1.029 12.821 | 11.764 | 10.836 10.017 2222 8.54 7.562 6.587 6.312 5.973 5.382 17.558 15.337 | 1.451|13.163 12.042 11.061 10.201 342 3.72 7.645 6.743 6.359 6.01 5.410 18.292 16..4 14.857 12.303 11.272 10.371 9.580 8.88 | 7.718 6.792 6.0.2 5.32 18.914 16.936 15.247 12.550 | 11.469 10.529 9.707 3.325 | | 7.784 6.235 6.34 5.51 19.523 7.413 | 12.78 11.554 10.675 9.223 2.077 7.3.3 6.873 66! 6.097 5.467 20.121 17.87 15.983 | 13.03 | 11.826 10.210 9922 2.161 7.295 6.306 6.91 6.118 | 5.80 18.327 13.21 11.987 10.935 10.027 9.237 7.943 6.335 6.514 6.136 5.492 21.281 | 18.7654 | 16.663 | 14.893 13.06 12.137 11.051 10.116 9.307 7.984 6.61 6.53. 6.152 5.502 21.8.4 19.188 591 12.278 1.158 10.193 9370 2.022 6.983 6.551 6.166 5.510 4.975 22.396 | 19.500 | 7.292 15.372 | 13.765 | 12.409 11.258 | 10.274 | 2427 | 8.055 7.00 || 6.566 6.17 5.517 | 4.978 | 27.35 | 23.15 | 7.159 | 15.046 | 13.32 | 11.925 | 10.757 | 9.779 | 8.244 17.105 6.542 6.233 5.5-8 | 4.997 39.196 | 31.424 | 25.730 | 21.482 | 18.256 | 15.762 | 13.801 | 12.233 | 10.962 | 9.915 | 8.304 | 7.133 | 6.661| 6.246 | 5.562 | 4.999 15.562 15.415 4.39] 4.30 6.39 6.073 15.622 BB 4.970 3924 Reference Periods 1.369 1.594 3.059 1% 1.010 1.020 1.030 1.041 1.051 1.062 1.072 1.083 1.094 1.105 1.116 1.127 1.138 1.149 1.161 1.173 1.184 1.196 1.208 1.220 1.232 4.652 2.252 2% 3% 1.020 1.030 1.040 1.061 1.061 1.093 1.082 1.126 1.104 1.159 1.126 1.194 1.149 1.230 1.172 1.267 1.195 1.305 1.219 1.344 1.243 1.384 1.268 1.426 1.2941.469 1.319 | 1.513 1.346 1.558 1.373 1.605 1.400 1.653 1.428 1.702 1.457 1.754 1.486 1.806 1.516 1.860 1.546 1.916 1.577 1.974 1.608 2.033 1.641 2.094 1.673 2.157 1.707 2.221 1.741 2.288 1.776 2.357 1.811 2.427 2.208 3.262 2.692 4.384 Future Value of $1 4% 5% 6% | 7% 8% 1.040 1.050 1.060 1.070 1.080 1.0821.103 1.124 1.145 | 1.166 1.125 1.158 1.191 1.225 1.260 1.170 1.216 1.262 1.311 1.360 1.217 | 1.276 1.338 1.403 1.469 1.265 1.340 1.419 1.501 1.587 1.316 1.407 1.504 1.606 1.714 | 1.477 1.718 1.851 1.423 1.551 1.689 1.838 1.999 1.480 1.629 1.791 1.967 2.159 1.539 1.710 1.898 2.105 2.332 1.601 1.796 2.012 2.518 1.665 1.886 2.133 2.410 2.720 1.732 1.980 2.261 2.579 2.937 1.801 2.079 2.397 2.759 3.172 1.873 2.183 2.540 2.952 3.426 1.948 2.292 2.693 3.159 3.700 2.026 2.407 2.854 3.380 3.996 2. 107 2.527 3.026 3.617 4.316 2.191 2.653 3.207 3.870 4661 2.279 2.786 3.400 4.141 5.034 2.370 2.925 3.604 4.430 5.437 2.465 3.072 3.820 4.741 5.871 2.563 3.225 4.049 5.072 6.341 2.666 3.386 4.292 5.427 6.848 2.772 3.556 4.549 5.807 7.396 2.883 3.733 4.822 6.214 7.988 2.999 3.920 5.112 6.649 8.627 3.119 4.116 5.418 7.114 9.317 3.243 4.322 5.743 7.612 10.06 4.801 7.040 10.29 14.97 21.72 7.107 11.47 18.42 29.46 46.90 9% 1.090 1.188 1.295 1.412 1.539 1.677 1.828 1.993 2.172 2.367 2.580 2.813 3066 3.342 3.642 3.970 4.328 4.717 5.142 5.604 6.109 6.659 7.258 7.911 8.623 9.399 10.25 11.17 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.798 4.177 4.595 5.054 5.560 6.116 6.727 7.400 8.140 8.954 9.850 10.83 11.92 13.11 14.42 15.86 17.45 45.26 117.4 12% 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.363 4.887 5.474 6.130 6.866 7.690 8.613 9.646 10.80 12.10 13.55 15.18 17.00 14% 15% 1.140 1.150 1.300 1.323 1.482 1.521 1.689 | 1.749 1.925 2011 2.195 2.313 2.502 2.660 2.853 3.252 3.518 3.707 4.046 4.226 4.818 5.350 5.492 6.153 6.261 7.076 7.1388.137 8.137 9.358 9.276 10.76 10.58 | 12.38 12.06 14.23 13.74 15.67 17.86 20.36 16.37 1.245 1.257 23.21 1.270 1.282 1.295 SS SS 19.04 .308 12.17 26.46 30.17 34.39 39.20 44.69 50.95 188.9 700. 2 -348 21.32 23.88 26.75 29.96 93.05 289.0 13.27 31.41 74.36 43.54 50.07 57.58 66.21 267.9 1,084 1.489 1.645 i Reference Periods 51 21.58 Future Value of Ordinary Annuity of $1 18 | 2 | 3 | | 4 | 5 | 6 | 7 | 8 9 | 10 | 128 | 14| 15% 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 2.010 | 2.020 | 2.030 2.040 | 2.050 | 2.060 | 2.070 | 2.080 2.00 12.100 | 2.120 | 2.140 | 2.150 3.030 | 3.060 | 3.91 3.122 | 3. 18 3.18. | 3.215 3.246 3.278 | 3310 | 3.374 | 3XL | 3473 4.060 | 4.122 4.184 4.246 4.310 4.375 | 4.20 4.506 4.573 | | 4.641 | 4.773 | 4.21 14.993 5.101 | 5.204 5.303 5.16 5.526 5.637 | 5.751 5.867 5.985 | 6.105 6.353 | 5.510 6.742 6.152 | 6.308 | 6.68 6.683 | 6.802 6.375 | 7.158 | 7.336 7.523 | 7.716 | 3.115 | 3.536 8754 7.21. | 7.32 | 7.662 7.898 | 8.142 8.394 | 8.54 | 8.923 9.200 19487 10.00 10.73 11.07 8.28 | 8.5% 8.882 9.214 9.548 9.897 | 10.260 10.64 11.03 11.44 12.30 3.23 3.73 3.363 | 3755 | 10.16 | 10.58 | 11.03 11.49 | 11.98 12.48 13.02 16.58 14.78 16.03 10.46 | 10.35 11.46 12.01 12.58 13.18 | 13.82 14.48 15.19 15.32 17.55 19.34 11.57 | 2.17 | 12.21 13.9 12.21 1.97 | 15.78 16.65 17.56 20.65 23.04 12.68 | 13.41 14.19 15.03 6.32 16.87 17.8 18.98 20.14 24.13 27.27 29.00 13.81 | 1.58 15.62 16.63 7.71 18.88 20.14 21.50 22.95 28.03 32.09 14.95 | 15.97 17.8 18.29 21.02 22.55 2.21 26.02 32.39 37.58 17.29 18.60 20.02 23.28 25.13 27.15 29.36 31.77 37.28 43.82 17.25 18.64 2016 21.82 27.8 30.32 33.00 35.35 42.75 50.98 18.3 20.01 21.76 23.70 20.84 3.75 6.7 40.54 48.28 8.12 65.08 19.51 21.41 23.41 25.65 30.91 4.00 37.5 41.30 45.50 55.75 68.39 75.84 20.81 22.84 25.12 27.67 8.76 37.38 41.45 46.02 | 51.16 68 .. 18.97 88.21 22.02 22.30 26.87 29.78 32.07 36.73 41.00 45.76 51.16 | 57.28 2.06 91.02 102.. 23.22 25.78 28.68 31.97 36.72 38.99 4.87 50.42 56.76 | 2.00 31.70 10.3 118.3 22.47 27.30 30.54 32.25 38.51 43.39 49.01 5.46 62.87 | 71.40 92.50 1204 137.6 28.85 32.45 36.62 41.43 47.00 8. .. | 60.88 88 | 79.54 | 10.6 138.3 159.3 343 2.08 4.50 50.82 58.18 66.76 76.78 | 8.50 1182 158.7 18.2 36.46 41.55 47.73 54.86 63.25 31 | 4.70 98.35 133.3 1813 212.8 58.16 68.68 9.95 | 32 | 103.2 150.3 245.7 63.71 74.48 87.35 | 102.7 121.1 238.5 283.5 68.53 80.70 25.34 | 113.0 13.2 130.7 272.9 327.1 52.97 3.54 87.35 10... 12.1 | 148.8 214.6 312.1 377.2 47.58 6.08 79.06 24.46 | 1133 136.3 | 16.5 | 241.3 356.3 43.7 75.40 95.03 120.8 | 152.8 | 199.5 | 255.1 | 3379 | 42.6 | 767.1 1,342 ITS | 112.3 152.7 | 2093 | 290.3 | 4065 | | 573.8 | | 215.1 | 1164 | 2.400 | 4.995 | | 7.218 >