# More Info The company is considering two possible expansion plans. Plan A would open eight smaller s

More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of \$8,500,000. 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, Lulus Company would open three larger shops at a cost of \$8,300,000. This plan is expected to generate net cash inflows of \$1,120,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is \$1,100,000. Lulus Company uses straight-line depreciation and requires an annual return of 9%. Print Done 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.) Plan A Plan B Payback 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 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 Inflow Annuity PV Factor (i=9%, n=10) PV Factor (1=9%, n=10) Present Value Years 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 A Calculate the NPV of Plan B. (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.) Plan B: Years Net Cash Inflow Annuity PV Factor (i=9%, n=10) PV Factor (i=9%, n=10) Present 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 B Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) = 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. 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 Lulus Company choose? Why? Lulus Company should invest in because it has a payback period, a VARR, a Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? net present value, and a profitability index. The IRR (internal rate of return) of Plan A is between This rate the company's hurdle rate of 9%. Periods 3 0 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.837 0.731 0.703 0.191 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.896 0.585 0.16 1% 2% 0.990 0.980 0.980 0.961 .971 0.942 0.961 0.924 0.951 0.906 0.942 0.888 0.933 0.871 0.923 0.853 0.914 0.837 0.905 0.820 0.804 0.887 0.788 0.879 0.773 0.870 0.758 0.861 0.743 0.853 0.728 0.844 0.714 0.836 0.700 0.828 0.686 0.820 0.673 0.811 0.660 0.803 0.647 0.795 0.634 0.788 0.622 0.780 0.610 0.772 0.598 0.764 0.585 0.757 0.574 0.7490.563 0.552 0.145 Present Value of \$1 5% 6% 7% 8% 9% 0.9520.9430.935 0.928 0.917 0.907 0.890 0.873 0.8570.842 0.864 0.840 0.816 0.794 0.772 0.823 0.792 0.7630.735 0.708 0.784 0.747 0.713 0.681 0.650 0.746 0.705 0.6660.630 0.596 0.711 0.623 0.583 0.547 0.677 0.5820.540 0.502 0.645 0.500 0.460 0.614 0.508 0.463 0.422 0.429 0.388 0.557 0.397 0.356 0.530 0.368 0.326 0.505 0.340 0.299 0.481 0.3150275 0.458 0.292 0.252 0.436 0.270 0.231 0.416 0.250 0.212 0.396 0.277 0.232 0.194 0.377 0.312 0.258 0.215 0.178 0.359 0.294 0.242 0.199 0.164 0.342 0.278 0.226 0.184 0.150 0.326 0.262 0.211 0.170 0.138 0.310 0.247 0.197 0.158 0.126 0.295 0.233 0.184 0.146 0.116 0.135 15 16 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.538 0.522 0.507 0.492 0.478 0.464 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.439 0.422 0.406 0.390 0.375 10% 12% 0.9090.893 0.826 0.797 0.751 0.712 0.683 0.636 0.621 0.567 0.564 0.507 0.513 0.452 0.467 0.404 0.424 0.361 0.386 0.322 0.350 0.287 0.319 0.257 0.290 0.229 0.263 0.205 0.239 0.183 0.163 0.198 0.146 0.180 0.130 0.164 0.116 0.149 0.104 0.135 0.093 0.123 0.083 0.112 0.074 0.102 0.066 0.092 0.059 0.053 0.047 0.042 0.037 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.064 0.056 0.049 0.043 0.038 0.033 0.029 0.026 0.022 0.020 0.005 0.001 0.107 0.093 18% 20% 0.847 0.833 0.7180.694 0.609 0.579 0.516 0.482 0.437 0.402 0.370 0.335 0.314 0.279 0.266 0.223 0.225 0.194 0.162 0.162 0.135 0.137 0.112 0.116 0.093 0.099 0.078 0.084 0.065 0.071 0.054 0.060 0.045 0.051 0.038 0.043 0.031 0.026 0.031 0.022 0.025 0019 0.022 0.015 0.019 0.013 0.016 0.010 0.014 0.009 0.011 0.007 0.010 0.006 0.008 0.005 0.007 0.004 0.001 0.001 18 19 20 21 0.125 0.108 0.093 0.080 0.069 0.060 0.051 0.044 0.038 0.033 0.028 0.024 0.021 0.018 0.016 0.014 0.012 0.003 0.001 0.081 0.070 0.061 0.053 0.046 0.040 0.035 0.030 0.026 0.023 0.020 0.017 0.015 0.361 0.450 125 0.347 0.333 0.321 0.437 0.424 0.412 0.116 0.228 0.141 0.003 0.004 0.001 Periods 12% 14% 0.893 0.877 1.6901.647 2.402 2.322 3.037 2.914 3.605 3.433 4.111 4.564 4.288 4.968 4.639 5.328 4.946 5.650 5.216 15% 16% 18% 0.870 0.862 0.847 1.6261.6051.566 2.283 2.246 2.174 2.855 2.798 2.690 3.352 3.274 3.127 3.784 3.812 3.889 5206 7.020 4.160 4.487 6241 4.772 5.019 5.938 5.234 5660 6.194 6.424 5.421 5.197 5.342 5.468 6.628 14 15 Present Value of Ordinary Annuity of \$1 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 1.970 1.942 1.9131.886 1.8331.8081.783 1.759 1.736 2.941 2.884 2.829 2.775 2.624 2.577 2.531 2.487 3.902 3.808 3.717 3.387 3.312 3.240 3.170 4.853 4.713 4.580 4.100 3.993 3.890 3.791 5.795 5.601 5.417 4.486 4.355 6.728 6.472 6.230 5.033 4.868 7.652 7.325 5.747 5.535 5.335 8.566 8.162 7.786 5.995 5.759 9.471 8.983 8.530 8. 1117.722 6.710 6.418 6.145 10.358 9.787 9.2538.760 8.306 7.139 6.805 11.255 10.575 9.954 9.3858.863 7.536 7.161 6.814 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 15.562 14.292 13.166 | 12.166 | 11.274 10.477 9.763 9.122 8.022 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 201 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 18.046 16.35 14.877 13.590 12.462 11.470 10.59 9.818 9.129 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 21.243 18.914 16.936 15 247 13.799 12.550 11.469 10.529 9.707 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 22.795 20.121 | 17.877 15.983 14.375 13.003 11.826 10.810 9.929 23.560 20.707 18.327 16.330 14.643 11.987 10.935 10.027 24.316 21.28118.764 16.663 14.898 12.137 11.051 10.116 25.066 21.844 19.188 16.984 15.141 12.278 11.158 10.198 25.808 22.396 19.600 17.292 15.372 12.409 11.258 10.274 9.427 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 31.424 25.730 21.482 18.256 13.801 12.233 10.962 9.915 7.824 5.842 6.002 6.142 6.265 6.373 6.457 6.550 5.583 5.724 5.847 5.954 6.047 6.128 6.198 8.544 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.844 4.870 4.891 4.909 4.925 4.937 4.948 4.956 4.964 4.970 4.975 4.979 4.997 4.999 6.811 6.974 7.120 7.250 7.366 7.469 7.562 7.545 7.718 7.784 7.843 19 5.467 13.211 28 13.406 8.022 8.055 40 | Future Value of \$1 | Periods | 1% | 28 | 3% | 4% | 5% | 6% | 78 | 8% | 9% | 100% | 12% | 14% | 15% | 1.00 1 1.020 | 1.030 11.040 11.050 11.060 | 1.070 11.080 1 1.090 | 1.100 | 1.120 11.140 | 1.150 2 | 1.020 | 1.040 11.06111.082 | L.103 | 1.124 | 1.145 11.166 | 1.188 11.210 11.254 11.300 11.323 1.030 | 1.061 | 1.093 | 1.125 | 1.158 | 1.91] 1.225 | 1.260 | 1.295 | 1.331 | 1.405 | 1.482 | 1.521 1.041 | 1.082 11.126 11.170 | 1.216 11.262 1 1.31111.360 | 1.412 11.464 11.574 | 1.68 | | 1.749 1.051 | 1.104 | 1.159 | 1.217 | 1.276 | 1.3381 1.403 11.469 | 1.539 | 1.61111.762 | 1.925 2011 1.062 | 1.126 11.194 11.265 | 1.340 | 1.419 | 1.5011 1.587 | 1.677 | 1772 | 1.974 12.195 12.313 1.072 1.149 11.230 11.316 11.407 | 1.504 | 1.606 | 1714 | 1.823 | 1.949 | 2211 | 2.502 2.660 1.033 | 1.172 11.2671 1.369 | 1.47 1.594 | 1.718 | 1.851 | 1.93 12.14 12476 12.853 3.056 1.094 | 1.195 | 1.305 | 1.423 | 1.551 1.689 | 1.838 1.999 | 2.172 | 2.358 | 2773 | 3.252 3.518 1.105 | 1.219 | 1.344 | 1.480 | 1.629 1. 1 | 1.967 | 2.15 | 2.367 2.594 13.106 | 3.707 4.046 1. 16] 1.243 | 1.384 | 1.539 | 1.70 | 1.898 | 2.105 12.332 ) 2.580 | 2.853 13.479 | 4.226 14.652 1.127 11.268 11.426 11.601 11.76 2012 2.252 2.518 2.813 13.138 13.96 14.18 5.350 1.138 | 1.294 | 1.469 11.665 1.886 2133 2.410 2.720 13.066 13.452 | 4.363 | 5.492 6.153 1.149 | 1.39 | 1.513 1.732 1.980 2261 2579 2.937 3.342 13.798 | 4.887 6.261 7.076 1.1611 1.346 1.801 | 2079 2.397 12.78 13.172 13.642 | 4177 | 5.474 | 17.138 | 8.137 1.173 | 1.373 | 1.605 | 1.873 2.183 2.540 2.952 | 3.426 ] 3.970 | 4.595 | 6.130 18.137 | 9.358 1.184 | 1.400 1.653 1.948 2.292 2.693 3.159 3.700 | 4.328 | 5.054 16.866 | 9.276 10.76 1.196 | 1.428 | 1702 2026 2407 2.854 3.380 3.996 | 4.717 | 5.560 17.690 | 10.58 12.38 11.208 | 1.457 | 1754 2107 12.527 3.026 3.617 14.316 | 5.142 6.116 ] 8.613 | 12.06 | 14.23 1.220 | 1.486 | 1.806 2191 2.653 3.207 3.870 4.61 | 5.604 | 6.727 | 9.646 | 13.74 16.37 1.232 | 1. 56] 1860 | 2.279 2.786 3.400 4.141 5.034 | 6.19 17.400 「10.80 | 15.67 | 13.82 1.245 1.546 1.916 2.370 2925 3.604 5.437 6.659 8.140 | 12.10 17.6 21.64 1.257 | 1.577 1.974 2.465 3.072 3.820 4.741 5.871 7.258 18.954 | 13.55 | 20.36 | 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 1.232 | 1.641 2.094 2.66 3.386 5.427 6.848] 8.623 | 10.3 | 17.00 126.46132.92 1.295 | 1.673 2.772 3.556 4.549 5.807 17.396 9.399 | 11.92 | 19.04 30.17 137.86 1.308 1.707 2.221 2.883 3.733 4.822 6.214 7.988 | 10.25 13.11 21.32 34.39 43.54 1.321 1.741 2.288 2999 3.920 5.112 8.627 | | 11.17 14.42 23.88 139.20 50.07 1.335 1.776 | 2.357 13.119 4.116 5.418 | 7.114 9.317] 2.17 | 15.86 | 26.75 | 4.8 17.58 1.348 1.811 | 2427 3.243 | 4.322 5.743 | 7.612 | | 10.06 ] 13.27 117.45 19.96] 50.95 16.21 1.489 2.208 | 3.262 14.801 | 7.040 || 10.29 | 14.97 | 21.72 | 31.41 | 45.26 | 93.05 | 188.9 267.9 1.645 | 2.692 | 4.384 | 7.107 | 11.47 | 18.42 | 29.46 | 46.90 | 74.36 | 117.4 | 289.0 | 700.2 | 1,084 4.430 4292 2157 6.69 | 4.921 | 4.93 Future Value of Ordinary Annuity of \$1 | Periods | % | 2% | % | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15%」 1 | 1.000 | 1.000 11.000 11.000 | 1.000 | 1.000 | 1.000 11.000 | 1.000 | 1.000 11.000 11.000 | 1.000 2010 | 2.020 1 2.030 12040] 2.050 | 2060 | 2.070 12.00 | 2.090 | 2.100 12120 12.14012 150 13.030 13.060 13.09113.122 13.153 13.184 13.215 13.246 13.278 13.310 13.374 13.40 13.473 4.060 14.122 14.184 14.246 | 4.310 | 4.375 | 4.440 14.506 | 4.573 | 4.641 | 4779] 4.921 5.101 | 5.204 15.309 15.416 15.526 15.637 15.75115.8671 5.985 | 6.105 | 6.353 16.610 | 6.742 6.152 || 6.308 16.468 16.633] 6.802 16.975 | 7.153 | | 6.802 | 6.975 | 7.153 17.336 | 7.523 | 7.716 ] 8.115 | 8.536 ] 8.754 7.214 | 7.434 | 7.662 | 7.898 | 8.142 | 8.394 | 8.654 8.923 9.200 19.487 | 10.09] 10.73 | 1.07 8.286 | 8.583 | 8.892 | 9.214 | 9.549 | 9.897 | 10.260 10.64 11.03 | 11.44 | | 12.30 | 13.23 | 13.73 9.369 9.755 | 10.16 10.58 | 11.03 11.49 | 11.98 12.49 13.02 | 13.58 14.78 | 16.09 | 16.79 10.46 10.95 | 11.46 | 12.01 12.58 113.18 | 13.2 | 14.49 15.19 15.4 | 17.55 | 19.34 | 20.30 11.57 12.17 | 12.81 | 13.49 | 14.21 | 14.97 | 15.73 || | 16.65 17.56 | 18.53 20.65 | 23.04 24.35 12.68 13.41 | 14.19 115.03] 15.92 | 16.87 | 17.的 18.98 20.14 | 21.38 24.13 | 27.27 29.00 13.81 14.68 15.62 | | 16.63 | 17.71 18.8 | 20.14 21.50 22.95 | 24.52 28.03 32.09 34.35 14.95 15.97 | 17.09 | 18.29 | 19.60 | 21.02 | 22.55 | 24.21 26.02 | 27.98 32.39 137.58 40.50 16.10 17.29 | 18.60 | 20.02 | 21.58 | 23.28 | 25.13 | 27.15 29.36 131.77 | 37.28 43.4 47.58 17.26 18.64 | 20.16 | 21.82 | 23.66 25.67 | 27.9 | | 30.32 | 33.00 135.95 | 42.75 | 50.98 155.72 20.01 21.76 23.70 25.84 28.21 | 30.84 33.75 36.97 | 40.54 48.8 59.12 65.08 21.41 23.41 25.65 28.13 30.91 | 34.00 37.45 || 141.30 | 45.60 | 15.75 | 68.39 75.84 22.84 | 25.2 27.67 30.54 33.76 | 37.38 41.45 | 46.02 | 51.16 163.4 | 78.97 83.21 24.30 | 26.87 | 29.78 | 33.07 | 36.79 | 41.00 45.76 | 51.16 | 57.28 | 72.05 | 91.02 102.4 25.78 28.68 131.97 135.72 139.99 | 44.87 56.76 | 64.00 10」 104.3 | 118.8 27.30 30.54 | 34.25 38.51 43.3 49.01 55.46 62.87 | 71.40 192.50] 120.4 137.6 28.85 132.45 | 36.62 | | 41.43 147.00 | 53.44 60.89 69.53 | 79.54 | 104.6 138.3 159.3 30.42 | 34.43 | 39.08 | 44.50 50.82 | | 58.18 66.76 76.7 | 88.50 | 118.2 | 158.7 | 184.2 32.03 136.46 | 41.65 | 47.73 | 154.86 | 63.25 173.11] 84.70 | 98.35 | 133.3] 181.9 | 212.8 33.67 | 38.55 | 44.31 51.11 | 59.16 | 68.8 179.95] 93.32 109.2 | 150.3 | 208.3 | 245.7 35.34 | 40.71 | 47.08 54.57 | 63.71 74.48 87.35 | 1027 | 121.1 | 169.4 | 238.5 283.6 37.05 | 42.93 | 49.97 | 58.40 | 68.53 | 80.70 95.34 113.0 | | 134.2 | 190.7 2729 | 327.1 38.79 | | 45.22 | 52.97 | 62.32 3.64 | | 87.35 | | 104.0 | | 124.1 | | 148.6 | | 214.6 1312.1 | 37.2 40.57 | 47.58 | 56.08 | 66.44 | 79.06 | 94.46 | 113.3 13631 164.5 | | 241.3 | 356.8 1434.7 60.40 | 75.40 | 95.03 120.8 | 154.8 | 1996 | 259.1 337.9 442.6 | 767.1 | 1,342 1,779 84.58 | 112.8 | 152.7 | 209.3 | 290.3 | 406.5 | 573.8 | 815.1 | 1,164 | 2.400 | 4,995 | 7.218 50.42 28.24 出此下中

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