Requirement 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,450,000. Expected annual net cash inflows are $1,600,000, 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 $8,100,000. This plan is expected to generate net cash inflows of $1,120,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,100,000. Division D uses straight-line depreciation and requires an annual return of 9%. 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, X.X.) Amount invested 1 Expected annual net cash inflow Plan A $ 8,450,000 1,600,000 Plan B $ 8,100,000 1,120,000 Payback 5.3 years 7.2 years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Average annual operating income 755,000 Average amount invested 4,225,000 $ Plan A Plan B ARR 17.9 % 9.1 % 420,000 4,600,000 Caclulate 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.) (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.) Plan A: Net Cash Annuity PV Factor PV Factor Present Enter any number in the edit fields and then click Check Answer. & parts remaining Clear All Check Answer % COMP26-1 (similar to) Question Help i Reference Reference Periods 15% | 1.000 2.150 1% 1.000 2.010 3.030 4.060 5.101 6.152 7.214 10% 1.000 2.100 3.310 4.641 6.105 12% 1.000 2.120 3.374 4.779 6.353 14% 1.000 2.140 3.440 4.921 6.610 3.473 4.993 6.742 8.286 2105 2.332 9.369 10.46 11.57 12.68 13.81 14.95 16.10 17.26 18.43 19.61 20.81 22.02 23.24 24.47 25.72 26.97 28.24 120.52 Future Value of Ordinary Annuity of $1 2% 3% 4% 5% 6% | 7% 8% 9% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.020 2.030 2.040 2.050 2.060 | 2.070 2.080 2.090 3.060 3.091 3.122 3.153 3.1843.215 3.246 3.278 4.122 4.184 4.246 4.310 4.375 4.440 4.506 4.573 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.308 6.468 6.633 6.802 6.975 | 7.153 | 7.336 7.523 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 8.583 8.892 | 9.214 9.549 9.897 10.260 10.64 11.03 9.755 | 10.16 10.58 11.03 11.49 11.98 12.49 13.02 10.95 11.46 | 12.01 12.58 13.18 13.82 14.49 15.19 12.17 12.81 13.49 14.21 14.97 15.78 16.65 17.56 13.41 14.19 | 15.03 15.92 16.87 17.89 18.98 20.14 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 15.97 17.09 18.29 19.60 21.02 22.55 24.21 26.02 17.29 18.60 20.02 21.58 23.28 25.13 27.15 29.36 18.64 20.16 21.82 23.66 25.67 27.89 30.32 33.00 20.01 21.76 23.70 25.84 30.84 33.75 36.97 21.41 23.41 25.65 28.13 30.91 34.00 37.45 41.30 22.84 25.12 | 27.67 30.54 33.76 37.38 | 41.45 | 46.02 24.30 26.87 29.78 33.07 36.79 41.00 45.76 51.16 25.78 28.68 | 31.97 35.72 39.99 44.87 50.42 56.76 27.30 30.54 | 34.25 38.51 43.39 49.01 55.46 62.87 28.85 | 32.45 36.62 41.43 | 47.00 53.44 60.89 69.53 30.42 34.43 39.08 | 44.50 50.82 58.18 66.76 | 76.79 32.03 36.46 41.65 47.73 54.86 63.25 73.11 84.70 22.67 | 20.55 LA 24 | 51 11 50 16 60 60 70 051 0220 7.716 8.115 8.536 8.754 9.487 10.09 10.73 11.07 11.44 12.30 13.23 13.73 13.58 14.78 16.09 16.79 15.94 17.55 19.34 20.30 18.53 20.65 23.04 24.35 21.38 24.13 27.27 29.00 24.52 28.03 32.09 34.35 27.98 32.39 37.58 40.50 31.77 37.28 43.84 47.58 35.95 42.75 50.98 55.72 40.54 48.88 59.12 65.08 45.60 55.75 68.39 75.84 51.16 63.44 78.97 88.21 57.28 72.05 | 91.02 102.4 64.00 81.70 104.8 118.8 71.40 92.50 120.4 137.6 79.54 104.6 138.3 159.3 88.50 118.2 158.7 184.2 98.35 | 133.3 181.9 212.8 100 2 1 150 2 1 209 21 2457 Future Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.010 1.020 1.030 1.040 | 1.050 1.060 1.070 1.080 1.090 1.100 1.120 1.140 1.150 1.020 1.040 1.061 1.082 | 1.103 1.1241.145 | 1.166 | 1.1881.210 1.254 1.300 1.323 1.030 1.061 1.093 | 1.125 1.158 1.191 1.225 1.260 1.295 | 1.331 | 1.405 1.482 1.521 1.041 1.082 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.574 1.689 1.749 1.051 1.104 1.159 1.217 1.276 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 1.062 1.126 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.974 2.195 2.313 1.072 1.149 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.949 2.211 2.502 2.660 1.083 1.172 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2.144 2.476 2.853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.773 | 3.252 3.518 1.105 | 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 1.116 1.243 1.384 1.539 1.710 1.898 2.105 2.580 2.853 3.479 4.226 4.652 1.127 1.268 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.896 4.818 5.350 1.138 1.294 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 4.363 5.492 6.153 1.149 1.319 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 6.261 7.076 1.161 1.346 1.558 1.801 2.079 2.397 2.759 3.172 3.642 4.177 5.474 7.138 8.137 1.173 1.373 1.605 | 1.873 2.183 2.540 2.952 3.426 3.970 4.595 6.130 8.137 9.358 1.184 1.400 1.653 1.948 2.292 2.693 | 3.159 3.700 4.328 5.054 6.866 9.276 10.76 1.196 1.428 1.702 2.026 2.407 2.854 3.380 3.996 4.717 5.560 7.690 | 10.58 12.38 1.208 1.457 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 1.220 1.486 1.806 2.191 2.653 3.207 3.870 4.661 5.604 6.727 9.646 13.74 16.37 1.232 1.516 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 10.80 15.67 18.82 1.245 1.546 1.916 2.370 2.925 4.430 5.437 6.659 8.140 12.10 17.86 21.64 1.577 1.974 | 2.465 3.072 3.820 4.741 5.871 7.258 8.954 13.55 24.89 1.270 1.608 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 15.18 23.21 28.63 1.282 1.641 2.094 2.666 3.386 4.292 5.427 6.848 8.623 10.83 17.00 26.46 32.92 1905 1 1672 11571779 12566 510 1 5 807 L 7 2061 200 1102 104 | 2017 | 27 Q6 28.21 Print Done Print Done Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) Average annual operating income 1 = ARR $ 755,000 Plan A Plan B Average amount invested 4,225,000 4,600,000 17.9 % 9.1 % 420,000 Caclulate 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.) (Click the icon to view Present Value of $1 table.) 5 (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.) Plan A: Present Net Cash Inflow Annuity PV Factor (i=9%, n=10) PV Factor (i=9%, n=10) Years Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows Initial Investment Net present value of Plan A Enter any number in the edit fields and then click Check Answer. O parts O remaining Clear All Check