Problem #4 Elizabeth Morales and Brooke Stone operate a chain of sub sandwich shops known as Stephany's Grinders, headquartered out of Denver, Colorado. The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $ 8,840,000. Expected annual net cah inflows are $ 1,600,000, with zero residual value at the end of nine years. Under Plan B, Stephany's Grinders would open three larger shops at a cost of $ 8,240,000. This plan is expected to generate net cash inflows of $ 1,250,000 per year for nine years, the estimated life of the properties. Estimated residual value for Plan B is $ 1,125,000. Stephany's Grinders uses straight- line depreciation and requires an annual return of 8%. Present Value of $1 @ 8% Year Factor 1 0.926 2 0.857 3 0.794 4 0.735 5 0.681 6 0.63 7 0.583 8 0.54 9 0.5 Present Value of an Annuity of $1 @8% Year Factor 1 0.926 2 1.783 3 2.577 4 3.312 5 3.993 6 4.623 7 5.206 8 5.747 9 6.247 10 6.71 Requirements: 10 0.463 1 Compute the payback period and the NPV of these two plans. What are the strengths and weaknesses of these two budget plans? 2 Which expansion plan should Elizabeth Morales and Brooke Stone choose? Why