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P26-31A (similar to) Question Help Limes Company operates a chain of sandwich shops. A (Click the icon to view additional information.) (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. (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 Plan A II years Plan B II years Choose from any list or enter any number in the input fields and then click Check Answer. ? Requirements 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 Limes Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? he a The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,600,000. Expected annual net cash inflows are $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Limes Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,020,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $980,000. Limes Company uses straight-line depreciation and requires an annual return of 8%. Present Value of $1 Periods 7% 1 2 3 4 5 1% 0.990 0.980 0.971 0.961 0.951 2% 0.980 0.961 0.942 0.924 0.906 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 5% 0.952 0.907 0.864 0.823 0.784 6% 0.943 0.890 0.840 0.792 0.747 0.935 0.873 0.816 0.763 0.713 8% 0.926 0.857 0.794 0.735 0.681 9% 0.917 0.842 0.772 0.708 0.650 10% 0.909 0.826 0.751 0.683 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 15% 0.870 0.756 0.658 0.572 0.497 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 6 7 8 9 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.456 0.400 0.351 0.308 0.270 0.432 0.376 0.327 0.284 0.247 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 11 12 13 14 0.896 0.887 0.879 0.870 0.804 0.788 0.773 0.758 0.722 0.701 0.681 0.661 0.650 0.625 0.601 0.577 0.585 0.557 0.530 0.505 0.527 0.497 0.469 0.442 0.475 0.444 0.415 0.388 0.429 0.397 0.368 0.340 0.388 0.356 0.326 0.299 0.350 0.319 0.290 0.263 0.287 0.257 0.229 0.205 0.237 0.208 0.182 0.160 0.215 0.187 0.163 0.141 0.195 0.168 0.145 0.125 0.162 0.137 0.116 0.099 0.135 0.112 0.093 0.078 Present Value of Ordinary Annuity of $1 Periods 2% 7% 8% b 2 3 4 5 1% 0.990 1.970 2.941 3.902 4.853 0.980 1.942 2.884 3.808 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 0.962 1.886 2.775 3.630 4.452 5% 0.952 1.859 2.723 3.546 4.329 6% 0.943 1.833 2.673 3.465 4.212 0.935 1.808 2.624 3.387 4.100 0.926 1.783 2.577 3.312 3.993 9% 0.917 1.759 2.531 3.240 3.890 10% 0.909 1.736 2.487 3.170 3.791 12% 0.893 1.690 2.402 3.037 3.605 14% 0.877 1.647 2.322 2.914 3.433 15% 0.870 1.626 2.283 2.855 3.352 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 6 7 8 9 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 11 12 13 10.368 9.787 9.253 11.255 10.575 9.954 12.134 11.348 10.635 12 na 12.10 11 200 8.76 9.385 9.986 10 2 8.306 8.863 9.394 ooon 7.887 8.384 8.853 0205 7.943 8.358 O 715 7.139 7.536 7.904 0241 6.805 7.161 7.487 6.495 6.814 7.103 7207 5.938 6.194 6.424 0 5.453 5.660 5.842 ann 5.234 5.421 5.583 E 724 5.029 5.197 5.342 .656 4.793 4.910 4.439 4.533 A041 11 7 70 Enno Future Value of $1 Periods 1% 2% 7% 1 2 3 4 5 1.010 1.020 1.030 1.041 1.051 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 1.070 1.145 1.225 1.311 1.403 8% 1.080 1.166 1.260 1.360 1.469 9% 1.090 1.188 1.295 1.412 1.539 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 15% 1.150 1.323 1.521 1.749 2.011 6 7 8 9 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 1.501 1.606 1.718 1.838 1.967 1.587 1.714 1.851 1.999 2.159 1.677 1.828 1.993 2.172 2.367 1.772 1.949 2.144 2.358 2.594 1.974 2.211 2.476 2.773 3.106 2.195 2.502 2.853 3.252 3.707 2.313 2.660 3.059 3.518 4.046 11 12 13 1.116 1.127 1.138 1 110 1.243 1.268 1.294 1.426 1.469 1.539 1.601 1.665 4 729 1.710 1.796 1.886 1 non 1.898 2.012 2.133 2201 .10 2.252 2.410 ..33 2.518 2.720 2027 2.580 2.813 3.066 2.853 3.138 3.452 3.4 3.896 4.363 4.818 5.492 4.6 5.350 6.153 14 11210 4 512 2670 2212 2 700 1007 CA1 7 na Periods 1 2 3 4 5 1% 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 3% 1.000 2.030 3.091 4.184 5.309 Future Value of Ordinary Annuity of $1 4% 5% 6% 7% 8% 9% 1.000 1.000 1.000 1.000 1.000 1.000 2.040 2.050 2.060 2.070 2.080 2.090 3.122 3.153 3.184 3.215 3.246 3.278 4.246 4.310 4.375 4.440 4.506 4.573 5.416 5.526 5.637 5.751 5.867 5.985 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 15% 1.000 2.150 3.473 4.993 6.742 6 7 8 9 10 6.152 7.214 8.286 9.369 10.46 6.308 7.434 8.583 9.755 10.95 6.468 7.662 8.892 10.16 11.46 6.633 7.898 9.214 10.58 12.01 6.802 8.142 9.549 11.03 12.58 6.975 8.394 9.897 11.49 13.18 7.153 8.654 10.260 11.98 13.82 7.336 8.923 10.64 12.49 14.49 7.523 9.200 11.03 13.02 15.19 7.716 9.487 11.44 13.58 15.94 8.115 10.09 12.30 14.78 17.55 8.536 10.73 13.23 16.09 19.34 8.754 11.07 13.73 16.79 20.30 11 12 13 11.57 12.68 13.81 140G 12.17 13.41 14.68 12.81 14.19 15.62 13.49 15.03 16.63 14.21 15.92 17.71 14.97 16.87 18.88 240 15.78 17.89 20.14 16.65 18.98 21.50 17.56 20.14 22.95 200 18.53 21.38 24.52 20.65 24.13 28.03 23.04 27.27 32.09 24.35 29.00 34.35 14 1507 17 no 10 10an 2124 7 no 2920 2750 Anan P26-31A (similar to) Question Help Limes Company operates a chain of sandwich shops. A (Click the icon to view additional information.) (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. (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 Plan A II years Plan B II years Choose from any list or enter any number in the input fields and then click Check Answer. ? Requirements 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 Limes Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? he a The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,600,000. Expected annual net cash inflows are $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Limes Company would open three larger shops at a cost of $8,300,000. This plan is expected to generate net cash inflows of $1,020,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $980,000. Limes Company uses straight-line depreciation and requires an annual return of 8%. Present Value of $1 Periods 7% 1 2 3 4 5 1% 0.990 0.980 0.971 0.961 0.951 2% 0.980 0.961 0.942 0.924 0.906 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 5% 0.952 0.907 0.864 0.823 0.784 6% 0.943 0.890 0.840 0.792 0.747 0.935 0.873 0.816 0.763 0.713 8% 0.926 0.857 0.794 0.735 0.681 9% 0.917 0.842 0.772 0.708 0.650 10% 0.909 0.826 0.751 0.683 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 15% 0.870 0.756 0.658 0.572 0.497 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 6 7 8 9 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.456 0.400 0.351 0.308 0.270 0.432 0.376 0.327 0.284 0.247 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 11 12 13 14 0.896 0.887 0.879 0.870 0.804 0.788 0.773 0.758 0.722 0.701 0.681 0.661 0.650 0.625 0.601 0.577 0.585 0.557 0.530 0.505 0.527 0.497 0.469 0.442 0.475 0.444 0.415 0.388 0.429 0.397 0.368 0.340 0.388 0.356 0.326 0.299 0.350 0.319 0.290 0.263 0.287 0.257 0.229 0.205 0.237 0.208 0.182 0.160 0.215 0.187 0.163 0.141 0.195 0.168 0.145 0.125 0.162 0.137 0.116 0.099 0.135 0.112 0.093 0.078 Present Value of Ordinary Annuity of $1 Periods 2% 7% 8% b 2 3 4 5 1% 0.990 1.970 2.941 3.902 4.853 0.980 1.942 2.884 3.808 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 0.962 1.886 2.775 3.630 4.452 5% 0.952 1.859 2.723 3.546 4.329 6% 0.943 1.833 2.673 3.465 4.212 0.935 1.808 2.624 3.387 4.100 0.926 1.783 2.577 3.312 3.993 9% 0.917 1.759 2.531 3.240 3.890 10% 0.909 1.736 2.487 3.170 3.791 12% 0.893 1.690 2.402 3.037 3.605 14% 0.877 1.647 2.322 2.914 3.433 15% 0.870 1.626 2.283 2.855 3.352 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 6 7 8 9 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 11 12 13 10.368 9.787 9.253 11.255 10.575 9.954 12.134 11.348 10.635 12 na 12.10 11 200 8.76 9.385 9.986 10 2 8.306 8.863 9.394 ooon 7.887 8.384 8.853 0205 7.943 8.358 O 715 7.139 7.536 7.904 0241 6.805 7.161 7.487 6.495 6.814 7.103 7207 5.938 6.194 6.424 0 5.453 5.660 5.842 ann 5.234 5.421 5.583 E 724 5.029 5.197 5.342 .656 4.793 4.910 4.439 4.533 A041 11 7 70 Enno Future Value of $1 Periods 1% 2% 7% 1 2 3 4 5 1.010 1.020 1.030 1.041 1.051 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 1.070 1.145 1.225 1.311 1.403 8% 1.080 1.166 1.260 1.360 1.469 9% 1.090 1.188 1.295 1.412 1.539 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 15% 1.150 1.323 1.521 1.749 2.011 6 7 8 9 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 1.501 1.606 1.718 1.838 1.967 1.587 1.714 1.851 1.999 2.159 1.677 1.828 1.993 2.172 2.367 1.772 1.949 2.144 2.358 2.594 1.974 2.211 2.476 2.773 3.106 2.195 2.502 2.853 3.252 3.707 2.313 2.660 3.059 3.518 4.046 11 12 13 1.116 1.127 1.138 1 110 1.243 1.268 1.294 1.426 1.469 1.539 1.601 1.665 4 729 1.710 1.796 1.886 1 non 1.898 2.012 2.133 2201 .10 2.252 2.410 ..33 2.518 2.720 2027 2.580 2.813 3.066 2.853 3.138 3.452 3.4 3.896 4.363 4.818 5.492 4.6 5.350 6.153 14 11210 4 512 2670 2212 2 700 1007 CA1 7 na Periods 1 2 3 4 5 1% 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 3% 1.000 2.030 3.091 4.184 5.309 Future Value of Ordinary Annuity of $1 4% 5% 6% 7% 8% 9% 1.000 1.000 1.000 1.000 1.000 1.000 2.040 2.050 2.060 2.070 2.080 2.090 3.122 3.153 3.184 3.215 3.246 3.278 4.246 4.310 4.375 4.440 4.506 4.573 5.416 5.526 5.637 5.751 5.867 5.985 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 15% 1.000 2.150 3.473 4.993 6.742 6 7 8 9 10 6.152 7.214 8.286 9.369 10.46 6.308 7.434 8.583 9.755 10.95 6.468 7.662 8.892 10.16 11.46 6.633 7.898 9.214 10.58 12.01 6.802 8.142 9.549 11.03 12.58 6.975 8.394 9.897 11.49 13.18 7.153 8.654 10.260 11.98 13.82 7.336 8.923 10.64 12.49 14.49 7.523 9.200 11.03 13.02 15.19 7.716 9.487 11.44 13.58 15.94 8.115 10.09 12.30 14.78 17.55 8.536 10.73 13.23 16.09 19.34 8.754 11.07 13.73 16.79 20.30 11 12 13 11.57 12.68 13.81 140G 12.17 13.41 14.68 12.81 14.19 15.62 13.49 15.03 16.63 14.21 15.92 17.71 14.97 16.87 18.88 240 15.78 17.89 20.14 16.65 18.98 21.50 17.56 20.14 22.95 200 18.53 21.38 24.52 20.65 24.13 28.03 23.04 27.27 32.09 24.35 29.00 34.35 14 1507 17 no 10 10an 2124 7 no 2920 2750 Anan