- More Info 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 $1,525,000 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 $8,000,000. This plan is expected to generate net cash inflows of $1,070,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,100,000. Lajos Company uses straight-line depreciation and requires an annual return of 10%. x 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 Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) Il Profitability index Il = Plan A Plan B Requireme Average amount invested Match the t Average annual operating income Capital Bu Initial investment hese capital budgeting methods? ach of the four capital budgeting models. of Capital Budgeting Method an be used to assess profitability, and takes into account sy. It has none of the weaknesses of the other models. Present value of net cash inflows Reference 14% 15% 16% 18% 20% 0.877 0.870 0.862 0.847 0.833 0.769 0.756 0.743 0.7180.694 0.675 0.658 0.641 0.609 0.579 0.592 0.572 0.552 0.516 0.482 0.519 0.497 0.476 0.437 0.402 ht al Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.797 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.712 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.636 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.567 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.507 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.452 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.404 Period 9 0.914 0.837 0.766 0.703 0.6450.592 0.544 0.500 0.460 0.424 0.361 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.322 Period 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.287 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 | 0.257 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.229 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 Period 16 0.853 0.7280.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.163 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.146 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.130 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.116 Period 20 0.820 0.673 0.554 0.456 0.377 0.3120.258 0.215 0.178 0.149 0.104 Period 21 0.811 0.660 0.538 0.439 0.359 0.294 0.242 0.199 0.1640.135 0.093 Period 22 0.803 0.647 0.522 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.083 Period 23 0.795 0.634 0.507 0.4060.326 0.262 0.211 0.170 0.138 0.112 0.074 Period 24 0.788 0.622 0.492 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.066 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092 | 0.059 Period 26 0.772 0.598 0.464 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.053 Period 27 0.764 0.586 0.450 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.047 Period 28 0.757 0.574 0.437 0.333 0.255 0.196 0.150 0.116 0.090 0.069 0.042 Period 29 0.749 0.563 0.424 0.321 0.243 0.185 0.141 0.107 0.082 0.063 0.037 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.033 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.011 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.003 0.456 0.432 0.410 0.370 0.335 0.400 0.376 0.354 0.314 0.279 0.351 0.327 0.305 0.266 0.233 0.308 0.284 0.263 0.225 0.194 0.270 0.247 0.227 0.191 0.162 0.237 0.215 0.195 0.162 0.135 0.208 0.187 0.168 0.137 0.112 0.182 0.163 0.145 0.116 0.093 0.160 0.141 0.125 0.099 0.078 0.140 0.123 0.108 0.084 0.065 0.123 0.107 0.093 0.071 0.054 0.108 0.093 0.080 0.060 0.045 0.095 0.081 0.069 0.051 0.038 0.083 0.070 0.060 0.043 0.031 0.073 0.061 0.051 0.037 0.026 0.064 0.053 0.044 0.031 0.022 0.056 0.046 0.038 0.026 0.018 0.049 0.040 0.033 0.022 0.015 0.043 0.035 0.028 0.019 0.013 0.038 0.030 0.024 0.016 0.010 0.033 0.026 0.021 0.014 0.009 0.029 0.023 0.018 0.0110.007 0.026 0.0200.016 0.010 0.006 0.022 0.017 | 0.014 0.008 0.005 0.0200.015 0.012 0.007 0.004 0.005 0.0040.003 0.001 0.001 0.001 0.001 0.001 fil