please help complete #4

4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,700,000. Expected annual net cash inflows are $1,550,000, 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 $8,250,000. 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 $1,300,000 Division D uses straight-line depreciation and requires an annual return of 10%. 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 Davidson's top management team for the best plan. Which expansion plan should Division D choose? Why? Requirement 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost $8,700,000 new product at a cost of $8,250,000. This plan is expected to generate net cash intlows of $1,090,000 per year for 10 years, me estimated 10% 4a. Compute the payback, the ARR, the NPV, and the profitability index for both plans Begin by calculating the payback for both plans. (Round your answers to one decimal place, XX) Amount invested Expected annual net cash inflow Payback $ 8,700.000 1,550,000 Plan B s 8,250,000 $ 1,090,000 Calculate the ARR (accounting rate of retum) for both plans. (Round your answers to the nearest tenth percent XX%) Average annual operating income Average amount invested ARR Pion 5 680,000 4,350,000 Plans S 395,000 S 4.775.000 Plan A 5.6 years 7.6 years $ 156 % 8.3 % Caciulite the NPV (net present value) of each plan Begin by calculating the NPV of Plan A (Complete all answer boxes. Enter a "O" for any a negative net present value) (Click the icon to view Present Value of $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) Net Cash PV Factor Present Plan A Years Annuity PV Factor (-10%, n=10) 6.145 (-10%, n=10) Inflow $1,550,000 value 1 - 10 Present value of annuity 5 9.524.750 10 0.386 0 Present value of residual value Total PV of cast inflows 9.524.750 (6.700.000) Nel piese Calciate the NPV of Plan B. (Complete all answer boxes Enter a "" for any zero balances or amounts that do not apply to the plan (Click the icon to view Present Value of $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 Present Net Cash Plan B : Annuity PV Factor (110%, n=10) 6.145 PV Factor (10%, 0-10) Inflow Value Years $ 1.090.000 110 Present value of annuity 0.386 10 Present value of residual value 1,300,000 $ 6,698,050 501,800 7,199,850 (8.250,000 S (1.050.150) Total PV of cash inflows 0 Initial investment Net present value of Plan B