Lulus Company operates a chain of sandwich shops. Computer the payback, the APR, the NPV, and the profitability of these two plans...Caclulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A....Calculate the NPV of Plan B....Calculate the profitability index of these two plans....
Lul Company operates a chain of sancich shops Click the icon to view additional information.) Read tham (Click the icon to view Present Value at $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) $1 ) E Requirement 1. Compute the payback, the ARR, the NPV and the profitability index of these two plans Calculate the payback for both paris Round your answers to one desirral place, XX) Payback years Plan A Plan B years + Calculate the ARR Accounting rate of burn) for both plans (Round your answers to the nearest tenth percent XXX) = ARR Pian A A IN Plan B % Cachuliste the NPV {nct present value) at cach plan. Begin by calculating the NPV of Plan A. (Complete al answer boxes. Enter for any zero balances or amounts that do not sppy to the plan. Enter any factor amounts to three decimal places, Xxxx. Use parentheses or a minus sign for a negative nel present value) Plan A: Net Cash Annuity PV Factor PV Factor Present Years Inflow ( (9%, n=10) I=9%, n=101 Value 1-10 Present value of annuity 10 Present value of residual value Total PV of cash Infos n Initial Investment Net present value of Plan A Calculate the NPV of Plan B. (Complete al answer boxes. Enter a 'V' for any zero balances or amounts that do not appy to the plan. Enter any factor amounts to three decimal plases, Xxxx. Use parentheses or a minus sign for a negative net present value) Plan : Net Cash Annuity PV Factor PV Factor Present Years Inflow (-9%, n=101 Value Choose from any list or enter any number in the input fields and then continue to the next question Calculate the NPV of Plan B. (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 B: Net Cash Annuity PV Factor PV Factor Present Years Inflow (i=9%, n=10) (i=9%, n=10) Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan B Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) . Profitability index Plan A Plan B Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Match the term with the strengths and weaknesses listed for each of the four capital budgeting models. Capital Budgeting Method Strengths/Weaknesses of Capital Budgeting Method 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 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. Can be used to assess profitability, but it ignores the time value of money. It allows us to compare alternative investments in present value terms and it also Choose from any list or enter any number in the input fields and then continue to the next question. weaknesses of the other models. Requirement 3. Which expansion plan should Lulus Company choose? Why? Lulus Company should invest in because it has a v payback period, a ARR, a net present value, and a profitability index. Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? The IRR (internal rate of return) of Plan A is between This rate the company's hurdle rate of 9%. Choose from any list or enter any number in the input fields and then continue to the next question. d weaknesses of these capital budaeting methods?
