PLEASE MAKE SURE TO ANSWER ALL REQUIREMENTS. THIS IS ONE QUESTION AND ALL INFO IS POSTED ON THE QUESTION.

Lulus Company operates a chain of sandwich shops. (Click the icon to view additional information.) (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.) 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.) Payback Plan A years Plan B years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) = ARR % Plan A Plan B Caciulate the NPV (net present value) of each plan. Begin by calculating the NPV of Plan A. (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.) Present Net Cash Inflow Annuity PV Factor (i=9%, n=10) PV Factor (i=9%, n=10) Value Plan A: Years 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment 0 Net present value of Plan A 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.) Net Cash Inflow Annuity PV Factor (i=9%, n=10) PV Factor (i=9%, n=10) Present Value Plan B: Years 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment 0 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 accounts for differences in the investments initial cost. It has none of the weaknesses of the other models. Requirement 3. Which expansion plan should Lulus Company choose? Why? Lulus Company should invest in because it has a payback period, a VARR, a n et 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%. * 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 $1,625,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lulus Company would open three larger shops at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,080,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,200,000. Lulus Company uses straight-line depreciation and requires an annual return of 9%. Print Done A 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 Lulus Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done 705 3 OOOOOOO 0 442 0 299 Present Value of $1 Periods 1% 12% 13% 14% 5% 6% % 8% 9% 10% 12% 14% 15% 16% 18. 20. | 0.990 | 0.980 | 0.971 | 0.962 | 0.952 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 | 0.893 | 0877 | .870 | 0.852 | 0.847 0.833 2 | 0.380 | 0.961 | 0.943 | 0.925 | 0.907 | 0.890 | 0.873 | 0.857 | 0.842 | 0.826 0.797 | 0.769 | 0.756 | 0.743 | 0.718 | 0.694 | 0.971 | 0.942 | 0.915 | 0.889 | 0.854 | 0.840 0.816 | 0.794 | 0772 0.751 0.712 10675 0.658 | 0641 0.509 | 0579 | 0.961 0.924 | 0888 | 0 355 0823 0.792 0.763 0.735 0.708 0.683 0.636 0.592 | 0.572 0.552 | 0.516 | 0.482 0.951 0.906 | 0.853 | 0.822 | 0.784 0.747 0.713 0.681 | 0.650 0.519 | 0.497 0.476 0.437 0.402 | 0.942 | 0.888 | 0.837 | 0.790 | 0.745 0.630 | 0.596 0.456 | 0432 | 0410 | 0.370 | 0.335 | 0.933 | 0.871 0.813 | 0.760 0.711 0.583 0.547 0.400 | 0.376 0 35 0314 0 279 | 0.923 0.853 0789 | 0731 | 0677 0.540 | 0.502 0.351 | 0.327 0.305 | 0 266 0 233 0.914 0.837 | 0.766 | 0.703 | 0.645 0.500 | 0 450 0.308 | 0.284 0.263 | | 0 225 0.194 0.905 | 0.820 | 0.744 | 0.676 | 0.614 0.463 0270 | 0.247 | 0 227 0.191 0.162 | 0896 | 0.804 | 0.722 | 0.650 | 0.585 0429 0 237 | 0215 | 0 195 o 162 | 0 135 0.887 | 0.788 | 0701 0.625 0.557 0.397 0.208 | 0.187 0.168 0.137 0.112 0.879 | 0773 | 0.681 | 0.601 | 0.530 0.368 | 0.182 | 0.163 | 0.145 | 0.116 | 0.093 0.870 | 0.758 | 0.661 | 0.577 0.505 0.388 0.340 0.205 0.160 | 0.141 | 0.125 | 0.099 | 0.078 | 0.851 | 0.743 0.642 | 0.555 | 0 481 0.315 0.183 | 0.140 | 0.123 | 0.108 0.084 | 0.065 | 0.853 | | 0.728 0.623 | 0.534 | 0 458 0.339 0.292 | 0 252 0.218 0.163 0.123 | 0.107 0.093 0.071 0.054 0.844 0.714 0.605 0.513 0.436 0.317 0270 0.231 0.198 0.146 0.108 | 0.093 | 0.080 0.060 0.045 | 0.836 | 0.700 | | 0.587 | 0 494 0 296 0.250 | 0212 | 0.180 0.130 | 0.095 | 0.081 0.059 0.051 0.038 | 0.828 | 0.686 0.570 | 0475 0.277 0.232 | 0.194 | 0.164 0.116 0.083 | 0.070 0.060 0043 0031 | 0.820 | 0.673 | 0.554 | 0.456 | 0.377 | 0.312 0 258 | 0215 | 0.178 | 0.149 | 0.104 | 0.073 | 0.051 | 0.051 0.037 0.026 | 0811 | 0.660 | | 0.538 | 0439 | 0.199 | 0 164 | 0.135 | .093 | .064 | 0.053 0.803 0647 0.522 | 0422 0.342 0.184 0.150 | 0.123 0.056 | 0.046 | 0.038 0.026 0.018 0.795 | 0.634 | 0.507 | 0406 | 0.326 0.170 | 0.133 0.112 0.049 | 0040 0.033 0.02 0.015 0.788 0.622 0.492 | 0.390 0.247 0.158 10.125 0.102 0.043 | 0.035 0028 0.019 0.013 | 0.780 0.610 | 0.478 | 0.375 | 0 295 0.233 | 0.184 | 0.146 0.038 | 0.030 0.024 0.016 0.010 | 0.772 0.598 | 0 464 | 0.361 | 0281 0.220 | 0.172 | 0.135 | 0.106 0.033 | 0.026 | 0.021 | 0.014 0 009 0.764 0.586 0.450 0.347 0.258 0.207 0.161 | 0.125 | 0.098 0.029 | 0.023 0.018 0.011 0 007 0757 0.574 | 0.437 | 0.333 | 0.255 | 0.196 || 0.150 | 0.116 | 0.090 0.026 | 0.020 | 0.016 | 0.010 0.006 | 0.749 | 0.563 | 0424 0.321 | 0.243 | 0.185 | 0 141 | 0.107 | | .063 0.037 0.022 | 0.017 | 0.014 | 0.008 0.005 0.742 | 0.552 | 0412 | 0.308 | 0.231 | 0.174 | 0.131 | .099 | 0.075 | 0.057 | 0.033 0.020 | 2015 | 2012 | 0.007 0.004 | 0.672 | 0453 | | 0.307 | 0 208 | 0.142 | 0.097 | .067 | .046 | 0 032 | .022 | 0.011 | 0.005 | 0.004 | 0.003 | 0.001 0.001 | 0.608 | 0.372 | 0 228 | 0.141 | 0.087 | 0.054 | 0.034 | 0.021 | 0.013 | 0.009 | 0.003 | 0.001 | 0.001 | 0.001 | 0.362 co me Egype="8 8888 8888 88| 0.416 0.396 0 359 0 044 0031 0278 | 0310 0.197 OO OOO 10.082 | Periods | | 186 717-11-05 4485 2.145 5.95 0575 6814 7103 6628 7606 12345 ro789BHQ2USBHBawww85%85 2561880HQ2BU56BB23& Present Value of Ordinary Annuity of $1 | T | | 48 | 58 | 6 | 7 | 8 | 9 | 10% | 12 | 14| 15% | 16 | 18. | 20 | | 0.80 | 0.71] 1.52 | 0.952 | 0.343 | 0335 | 0925 0917 10.00 10.89 10.877 10.870 | 0.852 | 0847 10.833 | 1913 | 1855 | 1.83 | 1.808 | 1.759 | 1736 | 1.590 | 1.647 | 1.626 1.605 | 1.56 1528 | 2825 | 2.775 | 2723 | 2.573 | 2624 28] 2487 12402 12322 12283 2.246 | | 217. 2106 377 3630 3546 3455 3387 3240 310 13.137 | 2014 2.798 L329 4212 A100 3.791 | 3.605 | 3433 5.076 | A517 4.767 4355 | 41 | 3.889 6.002 5.76 5582 5389 ... | 4288 6.733 6.463 6210 5571 5335 468 L639 7.35 7.108 | 6802 6.515 5.75 5328 4.46 8.11 7.722 | 360 | 7.024 9253 | 8.760 | 8.306 | 8877499 19385 | 8863 | 8.38. | 7343 | 10 635 | 9.986 |9394 | 8853 | 8358 11296 | 10 563 | 989 | 3295 | 8.745 3244 7785 7357 1998 | 11.18 | 10 380 | 9.72 | 5.108 859 561] 1652 |10838|10.16 347 8851 333 1824 6.97. 6.255 | 12 166 | 1274 | 10 477 5.763 9122 18544 8022 7.120 6373 | 12659 1690 | 10 828 9372 6457 | 13134 | 12 85 | 158 | 10.36 9.604 7366 6.550 | 13.50 | 12 462 | 11470 | 10.54 | 3818 7469 | 6.623 | 1029 | 12 821 10.017 13.163 | 12 042 | 11.061 | 10 201 8.72 6.743 3.89 2 33|1.272|0371 6.792 | 12 550 | 1465 | 10.525 9707 8.985 7784 6.835 14.034 | 12783 | 11.654 | 10.675 19823 | 3077 7843 6873 4.375| 13003 1826 | 10.810 | 9929 | 3.161 7896 6.06 1. 543 | 1321 | 11.987 | 10.935 | 10.027 | 9237 7.343 6.935 1. 88 | 13 106 | 12 137] 11.251 | 10.16 | 2307 7.98. 16.24 | 15 141 | 13.591 | 12278 | 118 0.198 | 2370 8.022 | 6.383 | 7292 | 15372 | 13.765 | 12 409 | 1258 | 10274 | 5427 | 8.05 | 2003 23.16 | 19793 17.159 | 15.046 | 13 32| 1925 | 10.757 8244 | 7.105 | 25.730 | 21.482 | 18255 | 15762 | 13.80] 12.233 | 10.62 | 915 | 8.304 | 13 | 6661 ------------------DDDDDDDDD ???)L.E3E.L.LLLL.A.E.L.SELECTCCCCCCC 8 1.764 6.67 on999 | 661 DC10CC - - Future Value of 31 Periods 1% 1.010 1.020 7% 1.070 | 1.145 8% 1.080 1.166 1.260 14% 1.140 1.300 15% 1.150 12% 1.120 1.254 1.405 5% 1.050 1.103 1.158 1.216 1.276 1323 9% 10% 1.090 1.100 | 1.188 1.210 1.295 1331 1.4121.464 1539 1.521 4% 1.040 1.082 1.125 1.170 1.217 1.265 1.316 1.369 1.423 1.480 6% 1.060 1.124 1.191 1.262 1338 1419 1.504 1.360 1.749 2% 3% 1.020 1.030 1.040 1.061 1.061 1.093 1.082 1.126 1.104 1.159 1.126 1.230 1.172 1.267 1.195 1.305 1.344 1.243 1.384 1611 1.340 1.677 1.772 1.149 1594 1.828 1.993 2.172 1.949 2144 ONNN 1.689 w 1.219 1.407 1.477 1.551 1.629 1.710 1.796 1.886 1.980 2.079 1.539 MOON 0 9 1.426 1.791 1.898 2012 2.133 2.261 2.397 1.601 1.665 1.732 1.801 1513 3.642 2540 ( 39 4595 O OOO 2693 7 viene nem 2854 3.026 3.207 8.613 9.646 20s 4.328 5.054 4.717 5.560 5.142 6.116 5.604 6.727 6.1097.400 6.659 8.140 7.258 8.954 7.911 9.850 10.80 604 3.820 4.049 12.10 13.55 15.18 4292 8.623 23 9399 10.83 1700 NNNNNNN 2132 2999 4549 3.733 4.822 3.920 5.112 3.1194.116 5.418 9.317 3.243 4.3225.743 7.612 10.06 7.040 1029 14.972172 7.107 11.47 18.42 29.46 46.90 11.92 19.04 10.25 13.11 11.17 14.42 23.88 12.17 15.86 13.27 17.45 29.96 31.41 45.26 93.05 74.36 1174 289.0 888 26.75 3 4.801 50.95 188.9 700.2 267.9 1.084 2.692 4.384 3215 | 3245 > 6.742 Future Value of Ordinary Annuity of S1 |Periods| 1 | 2% | 3% 4% | 5% | 6% | 7% | 8% |9% | 10% | 12% | 14 15% | 1000 | 1.000 1.000 | 1,000 | 1.000 | 1.000 | 1000 | 1000 | 1000 1000 1000 11.000. | 1.000 2.020 | 2,030 | 2,040 | 2.050 | 2.060 | 2.070 | 1080 | 2,090 | 2100 2120 | 2140 | 2150 3.060 | 3.091 | 3.122 3.153 3.184 | 3.278 | | 3310 3.374 | 3.440 3.473 4.122 4.184 | 4246 | 4.310 | 4.375 4. 440 4.506 4.573 | 4.541 | 4.779 | 4.921 | 4.333 5.204 | 5.309 | 5416 | 5.526 5.637 5.751 5.867 | 5.985 | 6.105 | 6.353 | 6.510 6.308 | 6.468 6.633 6.802 6.975 7.153 7.523 | 7.716 8.115 | 8.536 7.434 7.662 8.142 8.394 8.654 9.200 9.487 10.09 10.73 8.892 214 9.897 11.03 11.44 | 12.30 13:23 9.755 10.16 10.58 11.03 11.49 13.02 13.58 14.78 10.95 11.46 15.19 15.94 17.55 | 12.17 12.81 14.1 14.68 15.97 | 7.892 8.583 9 549 52 OWN COUW S | 13 41 - e. 33.00 , V ? 11. 16 72.0 - 45 36.97 41.30 46.02 51.16 63 44 | 78.97 57 28 56.76 64.00 81.70 | 104.8 62.87 71.40 92.50 120.4 69.53 79 54 104.6 138.3 76.79 88.50 118.2 158.7 84.70 98.35 1333 181.9 93.32 109.2 87.35 102.7 121.1 169 4 238.5 95.34 | 113.0 134.2 190.7 272.9 | 104.0 | 124.1 148.6 214.6 3121 94.46 113 3 | 136.3 | 164 | 24.3 356.8 199.6 | 259.1 | 337.9 | 442.6 | 767.1 | 1,342 406.5 | 573.8 | 815.1 | 1,164 | 2,400 | 4,995 = 150.3 | | 208.3 - - == 87.35 -- 47.58 75 40 | 84.58 ] 112.8 | 60.40 | 154, 8 E4 45 | 94 209.3 | 290.3