Leches Company operates a chain of sandwich shous. Click the loon to view additional Information (Click the icon to view Present Value of $1 table. {Click the icon to view Present Value of Ordinary Annuity af $1 table.) Read the raduirements Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) i More Info Requirement 1. Compule 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, XXI Plan A Plan B Payback year years The company is considering two possbit expansion plans. Plan A would apen eight smalershops at a cost of $8,400,000. Expected annual net cash innows are $1,600.000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Leches Company would open three langar shops at a cost of S. 100,000. This plan is expected to generate net cash inflows of $1.000.000 per year for 10 years, the estimaled useful life of the properties. Eslimaled residual value for Plan B is $980,000. Leches Company ubee straight-line depreciation and requires an annual return of ex Calculate the ARR (accouriling rale af return) for both plans. (Round your answers to the nearest tenth percent, XX%.) ARR Plan A %6 Print Plan B % Done Caculate the NPV (nat present Value) of each plan. Begin by calculating the NPV of Fian A. (Complete all answer boxes. Enter for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three deemal places, X.XXX. USA parenthases or a minus sign for a negative net present value.) Net Caeh Plan A: Years Annuity PY Factor (i-8%, n=10) PV Factor [1-6%, n=10) Present Value Inflow 1-10 Present value of annuity 10 Present value of residual value Total PV of cash inflows Initial Investment D Net present value of Plan A Calculate the NPV af Plan B. (Complete all answer boxes. Enter a "O 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.) Choose from any list or enter any number in the input fields and then continue to the next question ? whes Company operates a chain of sandwich Stous. loclick the icon to view actional information Read the reguirere le (Click the icon to view Present Value of $1 table. Click the ican to view Present Value of Ordinary Annuity of $1 tabl. Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Calculate the NPV of Pan B. (Complete all answer boxes. Enter a 'O' for any zero balances or amounts that do not apply to the plan. Enter any factor amounts to three decimal places, XXXX Use parentheses or a minus sign for a negative net present value) Plan B Net Cash PV Factor Present Annuity PV Factor (1=6%, n=10) Years Inflow I=6%, n=10) Value 1-10 Present value of annuty Present value of residual vnlux Total PV of cash in ons D Initial Investment Nel present value of Plan B Calculate the profitability Index of these two plans (Round to two decimal places XXX - Profitablity index Plan A 4 Plan B 1 Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Match the lerin with the strengths and weaknesses listed for each of the four capilal budgeting models. Capital Budgeting Method Strengths/Weaknesses of Capital Budgeting Method Is based on cash flows can be used to sass profitability, and takes into account the time value of money. It has none of the weaknesses of the other models Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Choose from any list or enter any number in the input fields and then continue to the next question. ? whes Company operates a chain of sandwich Stous. loclick the icon to view actional information) Read the repuirements (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 loan to view Future Value of $1 table) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Plan A Plan B Requirement 2. What are the strengths and weaknesses of these capital budgeting methode? Match the term with the strengths and weaknesses listed for each of the four capital bungaling models Capital Budgeting Method Strengths/Weaknesses Capital Budgeting Method 18 based on cash flows, can be used to assess profitability, and takes into account the time value of money. It has one of the weaknesses of the her models 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 lime value of money It allows us to compare alternative investments in present value terms and it also Bounts for differences in the investments initial cast. It has none of the weaknesses of the other models. Requirement 3. Which caansion plan should Leches Company choose? Why? Lechus Cornpany should invest in because it has a paytrack periud, VARR, ne prevent value, and a Requirement 4. Estimate Plan A'S IRR. How does the IRR compare with the company's required rate of retur? prolilablity index The IRR (Intemal rate of retum) of Plan A is between This rate the company's hurdle rate of 6%. Choose from any list or enter any number in the input fields and then continue to the next