Requirements - X 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 Lapos Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done Lapos Company operates a chain of sandwich shops. Click the icon to view additional information.) (Click the icon to view Present Value of $1 table.) O O Read the requirements. (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.) 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 Amount invested 8,400,000 8,300.000 1 IS Plan AS Plan B S Expected annual net cash inflow 1,550,000 1,030,000 5.4 years 8.1 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 Average amount invested = ARR Plan A = % Plan B 0 More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,400,000. Expected annual net cash inflows are $1,550,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lapos Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,030,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $980.000. Lapos Company uses straight-line depreciation and requires an annual return of 6%. Print Done Reference - o354 0.279 o.T22 0.650 0.135 Present Value of $1 nds 16 12 13 14 15 16 17 18 19. 10. 12% 14% 15% 10% 10% 20% O 900 10.980 10.971 | 0.962 | 0 952 | 0.943 | 0.935 | 0.925 | 0917 | 0.909 | 0.893 | 0.877 | 0.870 | 0.862 | 0.847 0.833 0.980 10.951 10.043 | 0.025 0.907 | 0.890 | 0.873 | 0.857 | .842 | 0.826 | 0.797 | 0.769 | 0.756 | 0.743 | 0.718 0.604 0.971 | 0.942 | 0.915 | 0.889 0.864 | 0.840 | 0.816 | 0.794 | 0.772 | 0.751 | 0.712 | 0.675 | 0.658 0.641 | 0.609 0.579 o 961 | 0.924 | 0.888 | 0.855 0.823 | 0.792 | 0.763 | 0.735 | 0.708 | 0.583 | 0.636 | 0.592 | 0.572 | 0.552 | 0.516 0432 0.951 | 0.906 | 0.863 | 0.822 | | 0.784 | 0.747 | 0.713 | 0.681 | 0.650 | 0.621 | 0.567 | 0.519 | 0.497 | 0.476 | 0.437 0.402 | 0.888 | 0.837 | 0.790 0.666 0.630 0.595 0.564 | 0.507 | 0.456 | 0432 0.410 0.335 | 0.871 | 0.813 | 0.760 0.623 0.583 0547 0.513 0.452 | 0.400 | 0.376 | 0.853 | 0.789 0.731 0.582 0.540 o 502 0.467 0.404 | 0.351 | 0.327 0.305 0.233 | 0.337 | 0.766 0.703 0.544 0.500 0 460 0.424 | 0.351 | 0.308 | 0 284 0 263 0.194 0.508 | 0.463 | 0422 0.386 | 0.322 | 0.270 | 0 247 0.227 0.162 0.350 0.287 0.237 | 0215 0.195 0.788 0.701 0.625 0.356 0.257 0.208 0.187 0.168 0.681 0.325 0.290 0.229 0.182 0.163 0.145 0.093 0.758 0.577 0.338 0 299 0.263 0.205 | 0.160 0.141 0.125 0.078 0.743 0.555 0.315 | 0 275 | 0.183 | 0.140 | 0.123 0.108 0.065 0.728 | 0 252 | 0.153 | 0.123 | 0.107 | .093 0.054 0.74 0.605 0.513 0.270 | 0 231 0.146 | 0.108 | 0.003 0.000 0.045 0.700 0.587 0.404 0.250 0212 0.180 0.130 0.095 0.081 0.00 0.038 0.823 0.686 0.570 0.475 0.277 0.232 | 0.104 0.164 0.116 0.083 | 0070 0.060 0.031 0.820 0.673 | 0.554 0.456 0.178 | 0.149 | 0.104 | 0.073 | 0061 .051 0.025 0.660 | 0.538 | 0.439 | 0.359 | 0 204 0.135 | | .093 | 0.064 | 0.053 .044 0.022 0.803 | 0.547 | 0.522 | 0.422 | 0.342 | 0.278 | 0.226 | 0.184 0.150 | 0.123 | 0.083 | 0.056 | 0.045 0.038 0.025 .018 0.795 0.634 | 0.507 | 0.405 | 0.325 0.262 | 0.211 | 0.170 | 0.138 | 0.112 | 0.074 | 0.04 | .040 | 0.033 0.022 0.015 0.788 0.622 | 0.492 | 0.390 | 0.310 | 0.247 | | 0.197 | 0.158 | 0.125 10. 102 0.056 | 0.043 | 0035 0028 0.019 0.013 0.780 | 0.510 | 0.478 | 0.375 | 0 205 | 0.233 | 0.184 | 0.146 | 0.115 | 0.002 | 0.059 | 0.038 | 0.030 | 0.024 | 0.016 | 0.010 | 0.319 0.112 0.773 * 0.66 0.623 | 0.534 0.258 To164 Print Done 0 Reference - X Periods 1% 2% 0.990 0.980 1.970 1.942 2.9412.884 3.902 3.808 3% 0.971 1.913 2.829 3.717 20% 0833 4% 0.962 1.886 2.775 3.630 5% 0.952 1.859 12% 0.893 1.690 2.402 3.037 14% 0.877 1.647 2.322 2.914 15% 0.870 1.625 2283 2.855 16% 0.862 1.605 2.246 2.798 18% 847 1.566 1.528 2.174 2.690 2091 totoo 4.031 Present Value of Ordinary Annuity of $1 6% 7% 8% 9% 10% 0.943 0.935 0.926 0.917 0.909 1.8331.808 1.783 1.759 1.736 2.673 2.624 2.577 2.531 2487 3.465 3.387 3.312 3.240 3.170 4.100 3.993 3.890 4.485 5.033 5.535 5.995 6.710 6.418 7.139 6.805 7.943 7.5367.161 8.358 7.904 7.487 9.295 8.745 8.244 7.785 9.712 9.108 8.559 8.061 10.106 9.447 8.851 8.313 10.477 9.763 9.122 8.544 10.828 10.059 9.372 8.756 11.158 10.336 9.604 8.950 11.470 10.594 9.818 9.129 11.764 10.836 10.017 | 9.292 12.042 11.061 10.2019.442 8.772 12.303 11.272 10.371 9.5808.883 12.550 11.469 10.529 9.7078.985 12783 11.654 10.675 9.8239.077 4.439 9.253 10.575 9.954 9.385 11.348 10.635 9.986 12.105 11.296 10.563 12.849 11.938 11.118 13.578 12.561 11.652 15.562 14.292 13.166 12.166 16.398 14.992 13.754 12.659 17.226 15.678 14.32413.134 18.046 16.351 14.877 13.590 18.857 17.011 15.415 14.029 19.660 17.658 15.937 14.451 20.456 18 292 16.444 14.857 21.243 18.914 16.936 15.247 22.023 19.523 17.413 15.622 4.730 4.775 9.899 10.380 10.838 11.274 11.690 12.085 12.462 12.821 13.163 13.439 13.799 14.094 4.844 4.870 5353 4.891 5.818 5.877 5.929 5.973 5.384 7.645 6.743 6.359 6.0115.410 7.718 6.792 6.399 6.044 5.432 7.7846.835 6.4346.073 5.451 7.8436.8736.464 6.097 5.457 4.909 4.925 4.937 4.948 Print Done 0 Reference - X Periods 1% 2% 0.990 0.980 1.970 1.942 2.9412.884 3.902 3.808 3% 0.971 1.913 2.829 3.717 20% 0833 4% 0.962 1.886 2.775 3.630 5% 0.952 1.859 12% 0.893 1.690 2.402 3.037 14% 0.877 1.647 2.322 2.914 15% 0.870 1.625 2283 2.855 16% 0.862 1.605 2.246 2.798 18% 847 1.566 1.528 2.174 2.690 2091 totoo 4.031 Present Value of Ordinary Annuity of $1 6% 7% 8% 9% 10% 0.943 0.935 0.926 0.917 0.909 1.8331.808 1.783 1.759 1.736 2.673 2.624 2.577 2.531 2487 3.465 3.387 3.312 3.240 3.170 4.100 3.993 3.890 4.485 5.033 5.535 5.995 6.710 6.418 7.139 6.805 7.943 7.5367.161 8.358 7.904 7.487 9.295 8.745 8.244 7.785 9.712 9.108 8.559 8.061 10.106 9.447 8.851 8.313 10.477 9.763 9.122 8.544 10.828 10.059 9.372 8.756 11.158 10.336 9.604 8.950 11.470 10.594 9.818 9.129 11.764 10.836 10.017 | 9.292 12.042 11.061 10.2019.442 8.772 12.303 11.272 10.371 9.5808.883 12.550 11.469 10.529 9.7078.985 12783 11.654 10.675 9.8239.077 4.439 9.253 10.575 9.954 9.385 11.348 10.635 9.986 12.105 11.296 10.563 12.849 11.938 11.118 13.578 12.561 11.652 15.562 14.292 13.166 12.166 16.398 14.992 13.754 12.659 17.226 15.678 14.32413.134 18.046 16.351 14.877 13.590 18.857 17.011 15.415 14.029 19.660 17.658 15.937 14.451 20.456 18 292 16.444 14.857 21.243 18.914 16.936 15.247 22.023 19.523 17.413 15.622 4.730 4.775 9.899 10.380 10.838 11.274 11.690 12.085 12.462 12.821 13.163 13.439 13.799 14.094 4.844 4.870 5353 4.891 5.818 5.877 5.929 5.973 5.384 7.645 6.743 6.359 6.0115.410 7.718 6.792 6.399 6.044 5.432 7.7846.835 6.4346.073 5.451 7.8436.8736.464 6.097 5.457 4.909 4.925 4.937 4.948 Print Done 0 Reference Future Value of $1 Periods 1% 1.010 1.020 1.030 8% 1.080 1.166 9% 1.090 1.188 1.295 10% 1.100 1.210 12% 1.120 1.254 1.405 1.331 14% 1.140 1.300 1.482 1.689 1.925 1.041 6% 7% 1.000 1.070 1.1241.145 1.191 1.225 1.262 1.311 1.338 1.403 1.419 1.504 1.594 1.689 4% 5% 1.040 1.050 1.0821.103 1.125 1.158 1.170 1.216 1217 1.276 1.265 1.340 1.316 1.407 1.369 1.477 1.423 1.551 1.480 1.629 1.539 1.601 1.796 1.886 1.732 1.801 15% 1.150 1.323 1.521 1.749 2011 2.313 2660 3.059 3.518 4.046 1243 2% 3% 1.020 1.030 1.040 1.061 1.061 1.093 1.082 1.125 1.104 1.159 1.126 1.194 1.149 1.230 1.172 1.267 1.195 1.305 1.219 1.344 1.384 1.268 1425 1.294 1.469 1.319 1513 1.346 1.558 1.373 1.605 1.400 1.653 1.428 1.702 1.457 1.754 1.435 1.806 1.5161.860 1.546 1916 1.577 1974 1.608 2.033 1.641 2.094 1.710 1665 1980 6261 5.474 7.138 5.350 6.153 7.076 8.137 9.358 10.76 9.276 10.58 12.06 13.74 1238 14.23 16.37 1.948 2.026 2. 107 2191 2.279 2370 2.465 2.563 2.666 1882 7.690 8.613 9.645 10.80 12.10 13.55 15.18 17.00 1.245 6.109 6.659 7.258 7.911 8.623 1.257 1.270 1.282 7.400 8.140 8.954 9.850 10.83 4.430 5.437 4.741 5.871 5.072 6.341 5.4276.848 17.86 20.36 1999 D 4.292 26.46 Print Done Reference Future Value of Ordinary Annuity of $1 | care| % | 7% | ; | ; | % | | | | F% | 10% ] 1 1 1 1 15% 000 11.00 | 1.000 | 1.00 | 1.000 | 1.000 | 1.00 | 1.00 | 1.000 1.rar | 1.70] | An | 1.000 200 12.20 2.30 | 2040 | 20150 | 2.050 | 2.07 | 2008 | 2020 | 2.100 | 2.120 ] 2.10 | | 2150 200 | 3.00 3.03 | 2|3155 | 3.184 | 3.215 3245 |3278 3.310 | 3.374 3440 3 400 | 22 4.18 | 4245 4. 30 4.375 | 4.40 4.505 | 14.373 4.114.79 4921/ 4973 5.101 | 5.204 5.209 | 5.416 | 5.325 | 5.637 | 5.51 | 53675985 5. 105 | 5.32] 6510 6.742 6.468 6.33 5.975 7.153 73 5 8754 7.552 8.142 3.34 8.5M 892 8.892 22 2.549 9.37 10.250 10.68 3.755 12.15 10.58 11.13 | 11.40 11.98 2.49 11.6 1231 14.12 15.52 17 6.306 6 5.115 - 155 Twenz-E GB9mwww SW m5mwEE 18 69 Tw%%%P%wism mQ wwwa EEE 1024 31.70 | 104.3 118.8 2.50 | 20 A 75 72.54 | 104.6 | 1383 | 1583 38.50 | 1182 | 1587 | 12 24.70 | 38 35 | 1353 | 819 | 212.8 28.35 | 3245|5.62 30.42 | 4.43|| 28 24 | 320 | 35.6 | 41.65 54.86 52.25 |3.11 Print Done