Time 1 of 11 (0 complete) andwich shops. nformation.) (Click the icon to view Present Val (Click the icon to view Present Valu (Click the icon to view Future Value (Click the icon to view Future Value 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 $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lolas Company would open three larger shops at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,050,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,000,000. Lolas Company uses straight-line depreciation and requires an annual return of 9%. Print Done of each plan. Begin by calculating the NPV of Plan A. (Complete all answer boxes. Enter a " y factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a nega Net Cash Annuity PV Factor PV Factor Present umber in the input fields and then continue to the next question. 1 of 11 (0 complete) This Question: 40 pts Question He b Accoul (Click the icon to view Present Value of $1 table.) enu als Company operates a chain of sandwich shops. Click the icon to view additional information.) Read the requirements ents (Click the icon to view Present Value of Ordinary Annuity of $1 ta (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 tab work z/Test 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 Plan B years years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) ARR Plan A % Plan B % Caciulate 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 balancer 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 PV Factor Present Choose from any list or enter any number in the input fields and then continue to the next question. 20 4 Pe 1 (Click the icon to view Present Value of $1 table.) Alas Company operates a chain of sandwich shops. Click the icon to view additional information.) 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.) % Plan B Caculate 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.XX. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Annuity PV Factor PV Factor Present Years Inflow (9%, n=10) (1=9%, n=10) Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan A Calculate the NPV of Plan B. (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, XOOX. Use parentheses or a minus sign for a negative net present value.) Plan B: Net Cash Annuity PV Factor PV Factor Choose from any list or enter any number in the input file Present (Click the icon to view Prese Jalas Company operates a chain of sandwich shops. Click the icon to view additional information.) Read the requirements. LUULU (Click the icon to view Prese (Click the icon to view Future (Click the icon to view Future Net present value of Plan A Calculate the NPV of Plan B. (Complete all answer boxes. Enter a "0" for any zero balances or amounts that do not apply decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Plan B: Net Cash Present Years Annuity PV Factor (i=9%, n=10) Inflow PV Factor (1=9%, n=10) Value 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan B (Click the icon to view Future Value of Net present Value or Plan D Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) 1 Profitability index Plan A = = Plan B Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Match the term with the strengths and weaknesses listed for each of the four capital budgeting models. Capital Budgeting Method Strengths/Weaknesses of Capital Budgeting Method Is based on cash flows, can be used to assess profitability, and takes into account the time value of money. It has none of the weaknesses of the other models. Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Can be used to assess profitability, but it ignores the time value of money. Choose from any list or enter any number in the input fields and then continue to the next question. the icon 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.) WITH VU Tey. TETSTIO U WESSUS UUTETTUCES Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Can be used to assess profitability, but it ignores the time value of money. It allows us to compare alternative investments in present value terms and it also accounts for differences in the investments' initial cost. It has none of the weaknesses of the other models Requirement 3. Which expansion plan should Lolas Company choose? Why? Lolas Company should invest in because it has a payback period, a VARR, a net present value, and a Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? The IRR (internal rate of retur) of Plan A is between profitability index This rate the company's hurdle rate of 9% Choose from any list or enter any number in the input fields and then continue to the next question. Time 1 of 11 (0 complete) andwich shops. nformation.) (Click the icon to view Present Val (Click the icon to view Present Valu (Click the icon to view Future Value (Click the icon to view Future Value 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 $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lolas Company would open three larger shops at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,050,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,000,000. Lolas Company uses straight-line depreciation and requires an annual return of 9%. Print Done of each plan. Begin by calculating the NPV of Plan A. (Complete all answer boxes. Enter a " y factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a nega Net Cash Annuity PV Factor PV Factor Present umber in the input fields and then continue to the next question. 1 of 11 (0 complete) This Question: 40 pts Question He b Accoul (Click the icon to view Present Value of $1 table.) enu als Company operates a chain of sandwich shops. Click the icon to view additional information.) Read the requirements ents (Click the icon to view Present Value of Ordinary Annuity of $1 ta (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 tab work z/Test 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 Plan B years years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) ARR Plan A % Plan B % Caciulate 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 balancer 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 PV Factor Present Choose from any list or enter any number in the input fields and then continue to the next question. 20 4 Pe 1 (Click the icon to view Present Value of $1 table.) Alas Company operates a chain of sandwich shops. Click the icon to view additional information.) 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.) % Plan B Caculate 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.XX. Use parentheses or a minus sign for a negative net present value.) Plan A: Net Cash Annuity PV Factor PV Factor Present Years Inflow (9%, n=10) (1=9%, n=10) Value 1 - 10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan A Calculate the NPV of Plan B. (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, XOOX. Use parentheses or a minus sign for a negative net present value.) Plan B: Net Cash Annuity PV Factor PV Factor Choose from any list or enter any number in the input file Present (Click the icon to view Prese Jalas Company operates a chain of sandwich shops. Click the icon to view additional information.) Read the requirements. LUULU (Click the icon to view Prese (Click the icon to view Future (Click the icon to view Future Net present value of Plan A Calculate the NPV of Plan B. (Complete all answer boxes. Enter a "0" for any zero balances or amounts that do not apply decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Plan B: Net Cash Present Years Annuity PV Factor (i=9%, n=10) Inflow PV Factor (1=9%, n=10) Value 1 - 10 10 Present value of annuity Present value of residual value Total PV of cash inflows 0 Initial Investment Net present value of Plan B (Click the icon to view Future Value of Net present Value or Plan D Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) 1 Profitability index Plan A = = Plan B Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Match the term with the strengths and weaknesses listed for each of the four capital budgeting models. Capital Budgeting Method Strengths/Weaknesses of Capital Budgeting Method Is based on cash flows, can be used to assess profitability, and takes into account the time value of money. It has none of the weaknesses of the other models. Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Can be used to assess profitability, but it ignores the time value of money. Choose from any list or enter any number in the input fields and then continue to the next question. the icon 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.) WITH VU Tey. TETSTIO U WESSUS UUTETTUCES Is easy to understand, is based on cash flows, and highlights risks. However, it ignores profitability and the time value of money. Can be used to assess profitability, but it ignores the time value of money. It allows us to compare alternative investments in present value terms and it also accounts for differences in the investments' initial cost. It has none of the weaknesses of the other models Requirement 3. Which expansion plan should Lolas Company choose? Why? Lolas Company should invest in because it has a payback period, a VARR, a net present value, and a Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? The IRR (internal rate of retur) of Plan A is between profitability index This rate the company's hurdle rate of 9% Choose from any list or enter any number in the input fields and then continue to the next