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please fill in the white spaces asap. Calculate the profitabllity index of these two plans. (Round to two decimal places XXX.) 4. Division D is
please fill in the white spaces asap.
Calculate the profitabllity index of these two plans. (Round to two decimal places XXX.) 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,500,000. Expected annual net cash inflows are $1,600,000, with zero residual value at the end of 10 years. Under Plan B, Division D would begin producing a new product at a cost of $8,240,000. This plan is expected to generate net cash inflows of $1,090,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $990,000. Division D uses straight-line depreciation and requires an annual return of 8%. a. Compute the payback, the ARR, the NPV, and the profitability index for both plans. b. Compute the estimated IRR of Plan A. c. Use Excel to verify the NPV calculations in Requirement 4(a) and the actual IRR for the two plans. How does the IRR of each plan compare with the company's required rate of return? d. Division D must rank the plans and make a recommendation to Deeler's top management team for the best plan. Which expansion plan should Division D choose? Why Step by Step Solution
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