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, XX.) Expected annual net cash inflow 1,525,000 1,070,000 Amount invested 8,425,000 8,300,000 Payback 5.5 years 7.8 years Plan A$ Plan B$ Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Average annual operating income 682,500 360,000 Average amount invested 4,212,500 4,750,000 ARR 16.2 % 7,6% Plan A$ Plan B$ Caclulate 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 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.) Plan A: Net Cash Annuity PV Factor (i-10%, n-10) PV Factor Present InflowC Value Years 1-10 0 (i-10%, n.10) Present value of annuity Present value of residual value Total PV of cash inflows Initial Investment Net present value of Plan A Present Value of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% | 16% | 18% | 20% 10.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 2 0.980 0.961 0.943 0.925 0.9070.8900.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694 3 0.971 0.942 0.915 0.889 0.8640.8400.816 0.7940.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 4 0.961 0.924 0.888 0.855 0.823 0.7920.763 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 5 0.951 0.906 0.863 0.822 0.7840.7470.713 0.681 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 6 0.942 0.888 0.837 0.790 0.746 0.7050.666 0.630 0.5960.564 0.507 0.456 0.432 0.410 0.370 0.335 7 0.933 0.871 0.813 0.760 0.7110.6650.623 0.583 0.547 0.513 0.452 0.400 0.376 0.354 0.314 0.279 8 0.923 0.853 0.789 0.731 0.6770.6270.582 0.540 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 9 0.914 0.837 0.766 0.703 0.6450.5920.5440.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 10 0.905 0.820 0.744 0.676 0.614 0.5580.508 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 0.162 11 0.896 0.804 0.722 0.650 0.585 0.5270.475 0.429 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.5570.4970.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 13 0.879 0.773 0.681 0.601 0.530 0.4690.415 0.368 0.326 0.290 0.229 0.182 0.163 0.145 0.116 0.093 14 0.870 0.758 0.661 0.577 0.505 0.4420.388 0.340 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.4170.362 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 16 0.853 0.728 0.623 0.534 0.458 0.3940.339 0.292 0.252 0.218 0.163 0.123 0.107 0.093 0.071 0.054 17 0.844 0.714 0.605 0.513 0.436 0.3710.317 0.270 0.231 0.198 0.146 0.108 0.093 0.080 0.060 0.045 18 0.836 0.700 0.587 0.494 0.416 0.3500.2960.250 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 19 0.828 0.686 0.570 0.475 0.396 0.3310.277 0.232 0.194 0.164 0.116 0.083 0.070 0.060 0.043 0.031 20 0.820 0.673 0.554 0.456 0.377 0.3120.2580.215 0.178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 21 0.811 0.660 0.538 0.439 0.359 0.2940.2420.199 0.1640.135 0.093 0.064 0.053 0.0440.031 0.022 22 0.803 0.647 0.522 0.422 0.342 0.2780.2260.184 0.150 0.123 0.083 0.056 0.046 0.038 0.026 0.018 23 0.795 0.634 0.507 0.406 0.326 0.2620.210.170 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 3 1 0.492 | 0.390 | 0.310 | 0.247 | 0.197 | 0.158 | 0.126 | 0.102 | 0.066 | 0.043 | 0.035 | 0.028 | 0.019 | 0.013 0.788 0.62 Present Value of Ordinary Annuity of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% | 16% | 18% | 20% 10.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 2 1.970 1.942 1.913 1.886 1.8591.8331.808 1.783 1.759 1.736 1.690 1.647 1.626 1.605 1.566 1.528 3 2.941 2.884 2.829 2.775 2.7232.6732.6242.577 2.531 2.487 2.402 2.322 2.283 2.246 2.174 2.106 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.855 2.798 2.690 2.589 5 4.853 4.713 4.580 4.452 4.3294.2124.100 3.993 3.890 3.791 3.605 3.433 3.352 3.274 3.127 2.991 6 5.795 5.601 5.417 5.242 5.076 4.9174.767 4.623 4.486 4.355 4.111 3.889 3.784 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.7865.5825.389 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 8 7.652 7.325 7.020 6.733 6.4636.2105.9715.747 5.535 5.335 4.968 4.639 4.487 4.344 4.078 3.837 9 8.566 8.162 7.786 7.435 7.1086.8026.515 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.303 4.031 10 9.4718.983 8.530 8.111 7.722 7.3607.024 6.710 6.418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 11 10.368 9.787 9.253 8.760 8.306 7.8877.4997.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 12 11.255 10.575 9.954 9.385 8.863 8.3847.9437.536 | 7.161 6.814 6.1945.660 5.421 5.197 4.793 4.439 13 12.134 11.348 10.635 9.986 9.3948.8538.3587.904 |7487 | 7.103 6.424 5.842 5.583 5.342 4.910 4.533 14 13.004 12.106 11.296 10.563 9.899 9.2958.745 8.2447.786 | 7.367 6.628 6.002 5.724 5.468 5.008 4.611 15 13.865 12.849 11.938 11.118 10.380 9.7129.1088.559 8.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 16 14.718 13.578 12.561 11.652 10.838 10.106 9.4478.8518.313 | 7.824 6.974 6.265 5.954 5.6695.162 4.730 17 15.562 14.292 13.166 12.166 11.274 10.4779.7639.122 8.544 8.022 7.120 6.373 6.047 5.749 5.222 4.775 18 16.398 14.992 13.754 12.659 11.690 10.82810.0599.372 8.756 8.201 7.250 6.467 6.128 5.818 5.273 4.812 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 6.198 5.877 5.316 4.844 20 18.046 16.351 14.877 13.590 12.462 11.470 10.5949.818 9.1298.514 7.469 6.623 6.259 5.929 5.353 4.870 21 18.857 17.011 15.415 14.029 12.821 11.76410.836 10.017 9.2928.649 7.562 6.687 6.312 5.973 5.384 4.891 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.4428.772 7.645 6.743 6.359 6.011 5.410 4.909 23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 7.718 6.792 6.399 6.0445.432 4.925 24 21.243| 18.914| 16.936| 15.247 | 13.799 | 12.550| 11.469| 10.529| 9.707 | 8.985 | 7.784 | 6835 | 6.434 | 6073 | 5.451 1 4.937 Future Value of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% 1 1.010 1.020 1.030 1.040 1.0501.0601.070 1.080 1.090 1.100 1.120 1.140 1.150 2 1.020 1.040 1.061 1.082 1.1031.1241.145 1.166 1.188 1.210 1.254 1.300 1.323 3 1.030 1.061 1.093 1.125 1.1581.1911.225 1260 1.295 1.331 1.405 1.482 1.521 4 1.041 1.082 1.126 1.170 1.2161.262311.360 1.412 1.464 1.574 1689 1.749 5 1.051 1.104 1.159 1.217 1.2761.3381.403 1.469 1.539 1.611 1.762 1.925 2.011 6 1.062 1.126 1.1941.265 1.3401419501.587 1.677 1.772 1.974 2.195 2.313 7 1.072 1.149 1.230 1.316 140715041.606 1.714 1.828 1.949 2.211 2.502 2.660 8 1.083 1.172 1.267 1.369 14771.5941.718 1.851 1.993 2.144 2.476 2.853 3.059 91.094 1.195 1.305 1.423 1.5511.6891.838 1.999 2.172 2.358 2.773 3.252 3.518 10 1.105 1.219 1.344 1.480 1.6291.7911.9672.159 2.367 2.594 3.106 3.707 4.046 11 1.116 1.243 1.384 1.539 1.710 1.8982.105 2.332 2.580 2.853 3.479 4.226 4.652 12 1.127 1.268 1.426 1.601 1.796 2.0122.2522.518 2.813 3.138 3.896 4.818 5.350 13 1.138 1.2941.469 1.665 1886 2.1332.4102.720 3.066 | 3.452 4.363 5.492 6.153 14 1.149 1.319 1.513 1.732 1980 2.2612.5792.937 3.342 3.798 4.887 6.261 7.076 15 1.161 1.346 1.5581.801 2.079 2.3972.759 3.172 3.642 4.7 5.474 7.138 8.137 16 1.173 1.373 1.605 1.873 2.183 2.5402.952 3.426 3.970 4.595 6.130 8.137 9.358 17 1.184 1.400 1.653 1.948 2.292 2.6933.1593.700 4.328 5.054 6.866 9.276 10.76 18 1.196 1.428 1.702 2.026 2.4072.8543.380 3.996 4.717 5.560 7.690 10.58 12.38 19 1.208 1.457 1.754 2.107 2.5273.0263.617 4.316 5.142 6.116 8.613 12.06 14.23 20 1.220 1.486 1.806 2.191 2.653 3.2073.8704.6615.604 6.727 9.646 13.74 16.37 21 1.232 1.516 1.860 2.279 2.786 3.4004.145.034 6.109 7.400 10.80 15.67 18.82 22 1.245 1.546 1.916 2.370 2.925 3.6044.4305.437 6.659 8.140 12.10 17.86 21.64 23 1.257 1.577 1.974 2.465 3.072 3.8204.745.871 7.258 8.954 13.55 20.36 24.89 3.2128.63 1 24 | 1.270 | 1.608 | 2.033 | 2.563 | 3.225 | 4.049 | 5.072 I 6.341 | 7.911 I 9.850 I 15.18 Future Value of Ordinary Annuity of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% 1 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 2.0502.0602.070 2.080 2.090 2.100 2.120 2.140 2.150 3 3.030 3.060 3.091 3.122 3.1533.1843.215 3.246 3.278 | 3.310 3.374 3.440 3.473 4 4.060 4.122 4.1844.246 4.3104.3754.4404.506 4.573 4.641 4.779 4.921 4.993 5 5.101 5.204 5.309 5.416 5.5265.6375.755.867 5.985 6.105 6.353 6.610 6.742 6 6.152 6.308 6.468 6.633 6.8026.9757.153 7.336 7.523 7.716 8.115 8.536 8.754 7 7.214 7.434 7.662 7.898 8.1428.3948.654 8.9239.2009.487 10.09 10.73 11.07 8 8.286 8.5838.892 9.2149.5499.89710.260 10.64 11.03 11.44 12.30 13.23 13.73 9 9.369 9.755 10.16 10.58 11.0311.4911.98 12.49 13.02 13.58 14.78 16.09 16.79 10 10.46 10.95 11.46 12.01 12.58 13.1813.8214.49 15.19 15.94 17.55 19.34 20.30 11 11.57 12.17 12.81 13.49 14.2114.9715.7816.65 17.56 18.53 20.65 23.04 24.35 12 12.68 13.41 14.19 15.03 15.92 16.8717.8918.98 20.14 21.38 24.13 27.27 29.00 13 13.81 14.68 15.62 16.63 17.71 18.8820.1421.50 22.95 24.52 28.03 32.09 34.35 14 14.95 15.97 17.09 18.29 19.60 21.0222.5524.21 26.02 27.98 32.39 37.58 40.50 15 16.10 17.29 18.60 20.02 21.58 23.2825.1327.15 29.36 31.77 37.28 43.8447.58 16 17.26 18.64 20.16 21.82 23.66 25.6727.89 30.32 33.00 | 35.95 42.75 50.9855.72 17 18.43 20.01 21.76 23.70 25.84 28.230.84 33.75 36.97 40.54 48.88 59.12 65.08 18 19.61 21.41 23.41 25.65 28.13 30.9134.0037.45 41.30 45.60 55.75 68.39 75.84 19 20.81 22.84 25.12 27.67 30.54 33.7637.38 41.45 46.02 51.16 63.44 78.97 88.21 20 22.02 24.30 26.87 29.78 33.0736.7941.0045.76 51.16 57.28 72.05 91.02 102.4 21 23.24 25.78 28.68 31.97 35.72 39.9944.8750.42 56.76 64.00 81.70 104.8 118.8 22 24.47 27.30 30.54 34.25 38.51 43.3949.055.46 62.87 71.40 92.50 120.4 137.6 23 25.72 28.85 32.45 36.62 41.43 47.0053.4460.8969.53 79.54 104.6 138.3 159.3 118.2 158.7 184.2 24 6.97 0.42 39.08 44.5 50.82 8.18 66.7676.79|88.5 The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,425,000. Expected annual net cash inflows are $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lukes Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,070,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,200,000. Lukes Company uses straight-line depreciation and requires an annual return of 10%. 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 Lukes Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return