Lukes Company operates a chain of sandwich shops. (i) (Click the icon to view additional information.) More info Read the requirements. The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,550,000. Expected annual net cash inflows are $1,625,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lukes Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,090,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. B is $980,000. Lukes Company uses straight-line depreciation and requires an Calculate the payback for both plans. (Round your answers to one decimal place, X.X.) annual return of 10%. Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Requirements Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (Complete all answer boxes. E minus sign for a negative net present value.) 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 Lukes Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Reference Reference Reference