Present Value of Annuity of $1 Periods 19% 2% 3% 49%6 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.605 1.566 1.528 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.402 2.487 2.322 2.246 2.174 2.106 4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.991 6 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 or l 8 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 9 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.759 5.328 4.946 4.607 4.303 4.031 10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 12 10.575 9.954 12.134 11.348 10.635 11.255 9.385 8.863 8.384 7.536 6.814 6.194 5.660 5.197 4.793 4,439 13 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 13.004 12.106 11.296 10.563 14 9.899 9.295 8.244 7.367 6.628 6.002 5.468 5.008 4.611 13.865 12.849 11.938 11.118 10.380 9.712 15 8.559 7.606 6.811 6.142 5.575 5.092 4.675 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 20 7.469 6.623 5.929 5.353 4.870 22.023 19.523 17.41315.622 14.094 12.783 10.675 9.077 25 7.843 6.873 6.097 5.467 4.948 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 30 8.055 7.003 6.177 5.517 4.979 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 40 8.244 7.105 6.233 5.548 4.997 un Reference Future Value of Annuity of $1 Periods 1% 2% 3% 6 % 4% 8 % 5% 10 % 14 % 16 % 12% 18% 20% 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 2 2.010 2.020 2.030 2.040 2.050 2.060 2.080 2.100 2.120 2.140 2.160 2.180 2.200 3,030 3 3.060 3.091 3.122 3.153 3.184 3.246 3.310 3.374 3.440 3.506 3.640 3.572 4 4,060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 7.442 6.353 6.610 6,877 7.154 6 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 8.536 8.977 9.442 9.930 7 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436) 12.300 13.233 14.240 15.327 16.499 9 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 16.085 17.519 19.086 20.799 10 10.462 10.950 11.464 12.578 13.181 12.006 14.487 15.937 17.549 19.337 21.321 23.521 25.959 11 11.567 13.486 12.169 12.808 14.207 14.972 16.645 18.531 20.655 23.045 25.733 28.755 32.150 12 12.683 13.412 14.192 16.870 18.882 15.026 15.917 18.977 21.384 24.133 27.271 30.850 34.931 39.581 13 13.809 14.680 15.618 16.627 17.713 21.495 24.523 28.029 32.089 36.786 42.219 48.497 14 14.947 15.974 17.086 18.292 19.599 21.015 24.215 27.975 32.393 37.581 43.672 50.818 59.196 15 16.097 17.293 18.599 20.024 21.579 23.276 27.152 31.772 37.280 43.842 51.660 60.965 72.035 33.06 36.786 20 22.019 24.297 26.870 29.778 45.762 57.275 72.052 186.688 91.025 115.380 146.628 25 41.646 47.727 54.865 73.106 28.243 32.030 36.459 98.347 133.334 181.871 249.214 342.603 471.981 30 34.785 40.568 47.575 56.085 66.439 79.058 113.283 164.494 356.787 241.333 530.312 790.948 1,181.882 767.091 1.342.025 2,360.757 4,163.213 7,343.858 40 48.886 60.402 75.401 95.026 120.800 154.762 259.057 442.593 I Present Value of $1 Periods 19% 2% 3% 4%6 5% 6% 10 % 8% 12% 16 % 14% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.909 0.926 0.893 0.877 0.862 0.847 0.833 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 3 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.712 0.751 0.675 0.641 0.579 0.609 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 7 0.933 0.871 0.813 0.760 0.711 0.583 0.665 0.513 0.452 0.400 0.354 0.314 0.279 8 0.923 0.853 0.789 0.731 0.467 0.677 0.627 0.404 0.540 0.351 0.266 0.305 0.233 0.914 0.837 0.766 , 0.500 0.703 0.645 0.592 0.424 0.361 0.308 0.263 0.225 0.194 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 11 0.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 20 0.820 0.673 0.554 0.377 0.312 0.215 0.456 0.149 0.104 0.073 0.051 0.037 0,026 25 0.295 0.233 0.780 0.610 0.478 0.375 0.146 0.092 0.059 0.038 0.024 0.016 0.010 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 on Periods 3 % 1% 2% 4% 12 % 10 % 5% 6% 8% 14 % 16% 18% 20 % 1.020 1 1.010 1.030 1.040 1.050 1.060 1.080 1.100 1.120 1.140 1.160 1.180 1.200 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 1.210 1.254 1.300 1.346 1.392 1.440 3 1.030 1.061 1.093 1.125 1.158 1.191 1.260 1.331 1.405 1.482 1.561 1.643 1.728 4 1.041 1.082 1.126 1.170 1.216 1.262 1.360 1.464 1.574 1.689 1.811 1.939 2.074 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 1.611 1.762 1.925 2.100 2.288 2.488 6 1.062 1.126 1.194 1.265 1.340 1.419 1.587 1.772 1.974 2.195 2.436 2.700 2.986 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 1.949 2.211 2.502 2.826 3.185 3.583 1.172 8 1.083 1.267 1.477 1.594 1.369 1.851 2.144 2.476 2.853 3.278 3.759 4.300 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 2.773 3.252 3.803 4.435 5.160 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 3.106 3.707 4.411 5.234 6.192 11 1.116 1.243 1.384 1.710 1.898 2.332 1.539 2.853 3.479 4.226 5.117 6.176 7.430 12 1.127 1.268 1.426 1.601 1.796 2.012 2.518 3.138 3.896 4.818 5.936 7.288 8.916 13 2.133 2.720 1.138 1.294 1.469 1.665 1.886 3.452 4.363 5.492 6.886 8.599 10.699 14 1.149 1.319 1.513 1.732 1.980 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12.839 15 1.161 1.346 2.079 2.397 3.172 1.558 1.801 4.177 5.474 7.138 9.266 11.974 15.407 20 1.220 1.486 1.806 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38.338 4.292 25 1.282 1.641 2.094 3.386 6.848 2.666 10.835 17.000 26.462 40.874 62.669 95.396 30 1.348 5.743 1.811 2.427 3.243 4.322 10.063 17.449 29.960 50.950 85.850 143.371 237.376 3.262 4.801 750.378 1,469.772 40 1.489 2.208 7,040 10.286 21.725 45,259 93.051 188.884 378.721 1. Compute the payback period, the ARR, and the NPV of these two plans. What are the strengths and weaknesses of these capital budgeting models? 2. Which expansion plan should Cuppa choose? Why? 3. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Requirement 1. Compute the payback period, the ARR, and the NPV of these tao plans. What are the strengths and weaknesses of these capital budgeting models? Begin by computing the payback period for both plans. (Round your answers to one decimal place.) years Plan A Plan B years Now compute the ARR (accounting rate of retum) for both plans. (Round the peroentages to the nearest tenth percent.) % Plan A Plan D Next compute the NPV (net present value) under each plan. Begin sign to represent a nogative NPV) wth Plan A then compute Plan B. (Round your answers to the nearmst whole dollar and use parentheses or a minus Net present value of Pian A Net present velue of Plan B Maich the term with the strengths and weeknesses isted for each of the three capital budgeting models. is based on cash fows, can be used to assoss profitability, ond takes into aocount the time value of money. It has none of the weaknesses of the other two models is easy to understand, is based on cash flows, and highlights risks However, it ignones profitablity and the time value of money. ,can be used to assess profitabiity, but it ignores the tme value of money Requirement 2. Which expension plan should Cuppa choose? Why? Recommendation Invest in payback period Raquirement 3. Estimate Plan A's RR How does he IRR compare with the company's required rate of retum thas the net present value. t also has e The iRR (ntemal rate of retum) of Plan A is betweon the company's hurdie rate of 10% This rete Choose from any ist or enter any number in the input fiids and then connue to the net queon Cuppa Inc. operates a chain of lunch shops. The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,940,000. Expected annual net cash inflows are $1,550,000 with zero residual value at the end of ten years Under Plan B, Cuppa would open three larger shops at a cost of $8,840,000. This plan is expected to generate net cash inflows of $1,100,000 per year for ten years, the estimated life of the properties. Estimated residual value is 50, (Click the icon to view the present value annuity factor table.) Cuppa uses straight-line depreciation and requires an annual return of 10 % (Click the icon to view the present value factor table.) (Click the icon to view the future value annuity factor table) (Click the icon to view the future value factor table.) Read the teaquitements Requirement 1. Compute the payback period, the ARR, id the NPV of these two plans. What are the strengths and weaknesses of these capital budgeting models? Begin by computing the payback period for both plans (Round your answers to one decimal place) Plan A 5.8 years Plan B 8.0 years torrect: 0 Now compute the ARR (accounting rate of return) for both plans. (Round the percentages to the nearest fenth percent.) Plan A % Plan B % Periods 3 % 1% 2% 4% 10 % 5% 6% 8% 12% 14% 16% 18% 20% 1.020 1 1.010 1.030 1.040 1.050 1.060 1.080 1.100 1.120 1.140 1.180 1.160 1.200 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 1.210 1.254 1.300 1.346 1.392 1.440 3 1.030 1.061 1.093 1.125 1.158 1.191 1.260 1.331 1.405 1.482 1.561 1.643 1.728 4 1.041 1.082 1.126 1.170 1.216 1.262 1.360 1.464 1.574 1.689 1.811 1.939 2.074 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 1.611 1.762 1.925 2.100 2.288 2.488 6 1.062 1.126 1.194 1.265 1.340 1.419 1.772 1.587 1.974 2.195 2.436 2.700 2.986 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 1.949 2.211 2.502 2.826 3.185 3.583 8 1.083 1.172 1.369 1.477 1.267 1.594 1.851 2.144 2.476 2.853 3.278 3.759 4.300 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 2.773 3.252 3.803 4.435 5.160 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 3.106 3.707 4.411 5.234 6.192 11 1.116 1.710 1.898 1.243 1.384 1.539 2.332 2.853 3.479 4.226 5.117 6.176 7.430 12 1.127 1.268 1.426 1.601 1.796 2.012 2.518 3.138 3.896 4.818 5.936 7.288 8.916 13 2.133 2.720 1.138 1.294 1.469 1.665 1.886 3.452 4.363 5.492 6.886 8.599 10.699 14 1.149 1.319 1.513 1.732 1.980 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12.839 15 1.161 1.801 2.079 2.397 3.172 4.177 1.346 1.558 5.474 7.138 9.266 11.974 15.407 20 1.220 1.486 1.806 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38.338 25 1.282 1.641 2.094 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 30 4.322 1.348 1.811 2.427 3.243 5,743 10.063 17.449 29.960 50.950 85.850 143.371 237.376 750.378 1,469.772 40 1.489 2.208 3.262 4.801 7.040 10.286 21.725 45,259 93.051 188.884 378.721