P26-31A (similar to) Lados Company operates a chain of sandwich shops. Click the icon to view additional information.) Read the requirements 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.) Amount invested Expected annual net cash inflow Payback Plan A $ 8,440,000 / 1,600,000 Plan B $ 8,300,000 1$ 1,020,000 8.1 years 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 5.3 years Plan A % Plan B % 1 12% 0.893 1690 2402 3037 3.605 3 5 14% 0.877 1647 2.322 2.914 3.433 3.889 4 288 4.639 4.946 5.216 7 4.111 4564 4968 5.328 5.650 5.453 5.660 5.842 6.002 Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0926 0917 0.909 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 2.941 2.884 2 829 2.775 2.723 2.673 2 624 2577 2531 2.487 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3240 3.170 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3 890 3.791 6 5.795 5.601 5.417 5.242 5.0764.917 4.767 4623 4.486 4355 6.728 6472 6.230 6.002 5.786 5582 5389 5206 5033 4868 8 7.652 7325 7.020 6.733 6.463 6.210 5.971 5.747 5535 5335 9 8.566 8.162 7.786 7.435 7.108 6 802 6.515 6.247 5.995 5.759 10 9.471 8.983 8.530 8.111 7.722 7360 7024 6.710 6.418 6.145 11 10.368 9.787 9.253 8.760 8.306 7.887 7499 7.139 6.805 6.495 12 11.255 10.575 9.954 9385 8.863 8.384 7.943 7536 7.161 6.814 13 12.134 11 348 10 635 9.986 9.394 8853 8 358 7.904 7.487 7. 103 14 13.004 12.106 11 296 10.563 | 9.899 9 295 8.745 8.244 7.786 7.367 15 13 865 12.849 11.938 11.118 10.3809712 9.108 8.559 8061 7.606 16 14.718 13.578 12 561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 17 1556214 292 13.166 12 166 11.274 10.477 9.763 9.122 8.544 8.022 18 16 398 14992 13.754 12 659 11.690 10.828 10.059 9.372 8.756 8.201 19 17 226 15678 14 32413.134 12.085 11.158 10 336 9604 8.950 8.365 20 18.046 16 351 14.877 13 590 12.462 11.470 10.594 9.818 9.129 8.514 21 18 85717.011 15415 14.029 12821 11.764 10.836 10.017 9.292 8.649 22 19.660 17.658 1593714.451 13.163 12042 11.061 10.2019.442 8.772 23 20.456 18 292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 24 21 243 18.914 16.936 15 247 13.799 12.550 11.469 10.529 9.707 8.985 25 22.023 19.523 17 413 15.622 14.094 1278311 654 10.675 9.823 9.077 26 22.795 20.12117 877 15 98314 375 13.003 11.826 10 810 9.929 9.161 27 23.560 20 707 18 327 16 330 14643 13 211 11.987 10.935 10.027 9.237 28 24 316 21.28118764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 29 25 066 21.84419. 188 16 984 15.141 13.591 12.278 11 158 10. 1989.370 30 25 808 22 396 19.600 17.292 15 372 13.765 12.409 11 258 10 274 9.427 40 32 835 27 355 23.115 19.793 17 159 15 046 13 332 11 925 | 10.757 9.779 6.142 15% 16% 18% 20% 0.870 0862 0.847 0.833 1 626 1.605 1.566 1528 2 283 2246 2.174 2.106 2855 2.798 2 690 2 589 3.352 3.274 3.127 2991 3.784 3.685 3.498 3.326 4.160 4,039 3.812 3.605 4.487 4.344 4.078 3.837 4.772 4607 4.303 4031 5.019 4.833 4494 4.192 5.234 5.029 4656 4.327 5.421 5.197 4.793 4.439 5583 5.342 4.910 4.533 5.724 5.468 5.008 4.611 5.847 5.575 5.092 4.675 5.954 5.669 5.162 4.730 6.047 5.749 5.222 4775 6.128 5.818 5273 4.812 6.198 5 877 5.316 6.259 5.929 5.353 4.870 6312 5 973 5 384 4891 6.359 6.011 5.410 4909 6.399 6.044 5.432 4925 6434 6073 5.451 4.937 6.464 6.097 5.467 4.948 6.491 6.118 5.480 4956 8.514 6.136 5.492 4.964 6534 6.152 5502 4.970 6.551 6.166 5510 4975 6.566 6.177 5517 4979 6642 6233 5548 4 997 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 7.562 7.645 7.718 7.784 7.843 7.896 7.943 7984 8 022 8.055 8 244 4844 6.265 6.373 6.467 6.550 6.623 6.687 6.743 6.792 6.835 6 873 6 906 6.935 6.961 6.983 7.003 7 105 The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,440,000. Expected annual net cash inflows are $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lados Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,020,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,100,000. Lados Company uses straight-line depreciation and requires an annual return of 9%. i Requirements W 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 Lados Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Periods 1 2 3.184 4 5 7 8 9 10 11 12 13 14 15 Future Value of Ordinary Annuity of $1 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 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 2010 2.020 2.030 2.040 2.050 2.060 200 2080 2.090 2100 2.120 2.140 2.150 3.030 3.060 3.091 3.122 3.153 32153.246 3278 3310 3.374 3.440 3.473 4.0604.122 4.184 4.2464.310 4.375 4.440 4.506 4573 4.641 4.779 4921 4993 5.101 5.204 5.309 5.416 5.526 5.6375.7515.867 5.985 6.105 6.353 6.610 6.742 6.152 6.308 6.468 6.633 6.802 6.975 7 1537.336 7.523 7.716 8. 115 8.536 8.754 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 9.487 10.09 10.73 11.07 8.286 8.583 8.8929.214 9.549 9.897 10.260 10.64 11.03 11.44 12.30 13.23 13.73 9.369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.19 15.94 17.55 19.34 20.30 11.57 12.17 12.81 13.49 14.21 14.97 15.78 16.65 1756 18.53 20.65 23.04 24.35 12.68 13.41 14 19 15.03 15.92 16.87 17.89 18.98 20.14 21.38 24.13 27.27 29.00 13.81 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34.35 14.95 15.97 17.09 18.29 19.60 21.02 22.55 24.21 26.02 27.98 32.39 37.58 40.50 16.10 17.29 18.60 20.02 21.58 23.28 25.13 27 15 29.3631.77 37.28 43.84 47.58 17.26 18.64 20.16 21.82 23.66 25.67 27.89 30.32 33.00 35.95 42.75 50.98 55.72 18.43 20.01 21.76 23.70 25.84 28 21 30.84 33.75 36.97 40.54 48.88 59. 12 65.08 19.61 21.41 23.41 25.65 28.13 30.91 34.00 37.45 41.30 45.60 55.75 68.39 75.84 20.81 2284 25.12 27.67 30.54 33.76 37 38 41.45 46.02 51.16 63.44 78.97 88.21 24.30 22.02 26.87 29.78 33.07 36.79 41.00 45.76 51.16 57.28 72.05 102.4 91.02 23 24 25.78 28.68 31.97 35.72 39.99 44.87 50.42 56.76 64.00 81.70 104.8 118.8 24 47 27 30 34.25 30.54 38.51 43.39 49.01 55.46 62.87 120.4 71.40 137.6 92.50 25.72 32.45 28.85 36.62 41.43 4700 53.44 60.89 69.53 79.54 104.6 1383 159.3 26.97 30.42 34.43 39.08 44.50 50.82 58.18 66.76 76.79 88.50 1182 158.7 1842 28.24 32.03 36.46 41.65 47.73 54.86 63.25 73.11 84.70 98.35 133.3 181.9 2128 29.53 33.67 44 31 38.55 51.11 59.16 208.3 68.68 79.95 | 93.32 245.7 1092 150.3 30.82 4708 35.34 54.67 40.71 63.71 74.48 169.4 87.35 238.5 1027 1211 283.6 32.13 37.05 42.93 49.97 68.53 2729 80 70 58.40 3271 95.34 190.7 113.0 134.2 38.79 33.45 45.22 52.97 73.64 214.6 312.1 87.35 3772 104.0 62.32 124.1 148.6 34.78 56 08 40.57 47.58 79.06 241.3 94.46 66.44 356.8 113.3 1645 136.3 434.7 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Periods 2. 3 4 5 1% 1.010 1.020 1.030 1.041 1.051 1.062 1.072 1.083 1.094 1.105 2% 1.020 1.040 1.061 1.082 1.104 1.126 1.149 1.172 1.195 1.219 6 7 8 9 10 11 12 13 14 15 1.116 1.127 1.138 1.149 1.161 1.173 1.184 1.196 1.208 1.220 1232 1 245 1.257 1.270 1 282 1 295 1.308 1.321 1335 1 348 16 17 18 19 20 Future Value of $1 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.030 1.040 1.050 1.060 1070 1.080 1.090 1.100 1.120 1.140 1.150 1.061 1.082 1.103 1.124 1.145 1.166 1.188 1.210 1.254 1.300 1.323 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.405 1.482 1.521 1.126 1.170 1.216 1.262 1 311 1.360 1412 1.464 1.574 1.689 1.749 1.159 1217 1276 1.338 1.403 1.469 1539 1.611 1.762 1.925 2011 1.194 1.265 1.340 1.419 1501 1.587 1.677 1.772 1.974 2.195 2 313 1.230 1.316 1.407 1.504 1.606 1.714 1828 1.949 2211 2.502 2.660 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2.144 2.476 2.853 3.059 1.305 1423 1.551 1.689 1 838 1.999 2.172 2.358 2773 3.252 3518 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 1.384 1.539 1.710 1.898 2.105 2.332 2580 2.853 3479 4.226 4.652 1.426 1.601 1.796 2012 2 252 2518 2.813 3.138 3.896 4.818 5.350 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 4.363 5.492 6.153 1.513 1.732 1.980 2 261 2579 2.937 3.342 3.798 4887 6.261 7.076 1.558 1.801 2079 2.397 2759 3.172 3.642 4.177 5.474 7.138 8.137 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.595 6.130 8.137 9358 1.653 1.948 2.292 2.693 3.159 3.700 4328 5.054 6.866 9.276 10.76 1.702 2.026 240771 2854 3 380 3.996 4.717 5.560 7.690 10.58 12.38 1.754 2.107 2.522 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 1.806 2.191 2.653 3.207 3.870 4.661 5.604 6.727 9.646 13.74 16.37 1.860 2279 2.786 3.400 4.141 5.034 6.109 7.400 10.80 15.67 18.82 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 12.10 17.86 21.64 1.974 2.465 3,072 3.820 4.741 5.871 7.258 8.954 13.55 20.36 2489 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 15.18 23.21 28.63 2.094 2.666 3.386 4.292 5.427 6.848 8.623 10.83 17.00 26.46 32.92 2.157 2.772 3.556 4.549 5.807 7396 9.399 11.92 19.04 30.17 37.86 2.221 2 883 3.733 4.822 6.214 7.988 10 25 13.11 2132 34.39 43.54 2 288 2.999 3.920 5.112 6.649 8.627 11.17 14.42 23.88 39 20 50.07 2357 3.119 4.116 5.418 7.114 9.317 12 17 15.86 26.75 44.69 57 58 3243 2427 4.322 5.743 7.612 10.06 1327 17.45 50.95 29.96 66 21 1.243 1.268 1.294 1.319 1.346 1.373 1.400 1.428 1.457 1.486 1.516 1.546 1.577 1.608 1.641 1.673 1.707 1.741 1.776 1.811 21 22 23 24 25 26 27 28 29 30 Present Value of $1 5% 6% 1 3 Periods 1% 2% 3% 4% 0.990 0.980 0.971 0.962 0.952 0.943 2 0.980 0.961 0.943 0.925 0.907 0.890 0.971 0.942 0.915 0.889 0.864 0.840 4 0.961 0.924 0.888 0.855 0.823 0.792 5 0951 0.906 0.863 0.822 0.784 0.747 6 0.942 0.888 0.837 0.790 0.746 0.705 7 0933 0.871 0.813 0.760 0.711 0.665 8 0.923 0853 0.789 0731 0677 0627 9 0914 0837 0766 0.703 0645 0592 10 0.905 0 820 0.744 0.676 0614 0558 11 0896 0804 0.722 0.650 0.585 0527 12 0.887 0.788 0.701 0.625 0557 0.497 13 0.879 0.773 0.681 0.601 0530 0.469 14 0.870 0.758 0.661 0.577 0.505 0.442 15 0.861 0.743 0.642 0.555 0.481 0417 16 0.853 0.728 0.623 0534 0.4580394 17 0 844 0.714 0.605 0513 0.436 0371 18 0.836 0.700 0587 0.494 0.416 0350 19 0.828 0.686 0.570 0.475 0.396 0331 20 0.820 0.673 0.554 0.456 0.377 0.312 21 0811 0.660 0538 0.439 0.359 0.294 22 0.803 0.647 0.522 0.422 0.342 0278 23 0.795 0.634 0507 0.406 0.326 0262 24 0.788 0.622 0.492 0.390 0.310 0.247 25 0.780 0.610 0.478 0.375 0.295 0233 26 0.772 0598 0464 0.361 0.281 0 220 27 0.764 0586 0.450 0.347 0.268 0207 28 0.757 0574 0.437 0.333 0255 0.196 29 0.749 0563 0.424 0.321 0.243 0.185 30 0.742 0552 0412 0 308 0 231 0 174 7% 0935 0.873 0.816 0.763 0.713 0.666 0.623 0582 0.544 0508 0.475 0444 0.415 0.388 0.362 8% 9% 10% 0.926 0917 0.909 0.857 0842 0.826 0.794 0.772 0.751 0.735 0.708 0683 0.681 0650 0.621 0.630 0 596 0564 0583 0.547 0.513 0540 0502 0.467 0.500 0.460 0.424 0.463 0.422 0386 0.429 0.388 0.350 0.397 0.356 0.319 0 368 0326 0 290 0 340 0 299 0.263 0315 0275 0.239 0292 0252 0.218 0270 0231 0.198 0.250 0212 0.180 0 232 0.194 0.164 0.215 0.178 0.149 0.199 0.164 0.135 0.184 0.150 0.123 0.170 0.138 0.112 0.158 0.126 0.102 0.146 0.116 0.092 0.135 0.106 0.084 0.125 0.098 0.076 0.116 0.090 0 069 0.107 0.082 0.063 0.0990075 0.057 12% 14% 15% 16% 18% 20% 0.893 0.877 0.870 0.862 0 847 0.833 0.797 0.769 0.756 0.743 0.718 0.694 0.712 0.675 0.658 0.641 0.609 0.579 0.636 0.592 0.572 0552 0.516 0.482 0.567 0519 0.497 0476 0.437 0.402 0507 0.456 0.432 0.410 0370 0.335 0.452 0.400 0.376 0.354 0.314 0.279 0.404 0351 0.327 0.305 0.266 0.233 0 361 0.308 0284 0.263 0 225 0.194 0.322 0270 0.247 0227 0.191 0.162 0.287 0.237 0215 0.195 0.162 0.135 0.257 0.208 0.187 0.168 0.137 0.112 0 229 0.182 0.163 0.145 0.116 0 093 0 205 0.160 0.141 0.125 0 099 0.078 0.183 0.140 0.123 0.108 0.084 0.065 0.163 0.123 0.107 0.093 0.071 0054 0.146 0.108 0.093 0.080 0.060 0.045 0.130 0.095 0.081 0.069 0051 0.038 0.116 0.083 0.070 0.060 0.043 0.031 0.104 0.073 0.061 0.051 0.037 0.026 0 093 0.064 0.053 0044 0.031 0.022 0.083 0.056 0.046 0.038 0.026 0.018 0.074 0.049 0.040 0.033 0.022 0.015 0.066 0.043 0.035 0.028 0.019 0.013 0.059 0038 0.030 0.024 0.016 0.010 0.053 0.033 0.026 0.021 0.014 0.009 0.047 0.029 0.023 0.018 0.011 0 007 0.042 0.026 0.020 0.016 0.010 0.008 0.037 0.022 0.017 0014 0.008 0.005 0033 0 020 0 015 0012 0.007 0.004 0.339 0317 0296 0.277 0258 0 242 0226 0211 0.197 0.184 0.172 0.161 0.150 0.141 0131