80.2K

Verified Solution

Link Copied!

All requiremnts please

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, XX) Payback years yors Plan A Plan B Calculate the ARR (accounting rate of rotum) for both plans (Round your answers to the nearest tenth percent XX%) ARR Plan A % Plan B Caciulate the NPV (not prosent value) of each plan Begin by calculating the NPV of Pin A (Complete all answer boxes Enterotorany 20 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 nel present value Plan A Net Cash Annuity PV Factor PV Factor Present Years Inflow (I-10%, 1410) (I-10%, n=10) Value Years Caciulate the NPV (not 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 XXXX. Use parentheses or a minus sign for a negative not present value) Plan A: Net Cash Annuity PV Factor PV Factor Present Inflow (1=10%, 10) (10%, n=10) Value 1-10 Present value of annuity 10 Present value of residual value Total PV of cash inflows 0 Initiat investment Not present value of Pan 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, X XXX Use parentheses of a minus sign for a negative not present value Plan B Net Cash Annuity PV Factor PV Factor Present Years Inflow (-10%, 10) (-10% n10) Value 110 Present value of annuity uns i More Info ate o The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,550,000 Expected annual net cash inflows are $1,625,000 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 $8,000,000 This plan is expected to generate net cash inflows of $1,100,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,300,000. Lulus Company uses straight-line depreciation and requires an annual return of 10%. for any ze pra negativ t value he plan Print Done Salute 1 Reference sca (CH d the clulat Sunt an A: Kears 1.10 Present Value of $1 Periods 1% 2% 3% 4% 6% 7% 8% 9% 10% 12% 14% 15% 165 18% 20% Period 1 0.990 0.9800.9710 962 0 952 0943 0.935 0.920 0.917 0.909 0.893 0877 0.870 0.862 0.8470.833 Period 2 0.980 0961 0.943 0925 0907 0.890 0.873 0.8570.842 0.826 0.797 0.769 0.756 0.743 07180894 Period 3 0971 0.942 0.915 0.889 0.884 0.340 0.816 0.7940.772 0.751 0.712 0.675 0.6580 641 0.500 0.579 Period 4 0.961 0.9240.888 0 855 0.8230.7920.763 0.735 0.708 0 683 0.630 0.592 0.5720552 0.516 0.482 Period 5 0.951 0905 0.883 0 822 0.7840 747 0.713 0.681 0 650 0.621 0.567 0519 0.497 04760437 0.402 Period 6 0.9420 888 0.837 0 790 0746 O 705 0.888 0.6300596 0564 0.507 0.456 0432 0410 0.370 0.335 Period 7 0 933 0871 0.813 076007110 665 0.623 0.583 0 547 0.513 0.452 0.400 0.3760354 03140 279 Period 8 0.923 0.053 0.789 0.731 06770627 0582 0540 0.502 0.467 0.4040351 0.327 0.305 0 266 0233 Period 9 0.914 0 B37 0.766 0703 0.645 0.59205440.500 0.400 0.4240351 0308 0.284 0 263 0225 0.194 Period 10 0005 0.820 0.744 0678 0.614 0.558 05080463 0222 0388 0.322 0.270 0.2470 227 0.191 0.162 Period 11 0.895 0.804 0.7220 650 0.585 0.527 0.475 0.420 0.388 0.350 0.287 0237 02150195 0.162 0.135 Period 12 0.887 0.788 0.701 0625 0567 0497 0.444 0.397 0.356 0310 0257 0208 0 1870 168 0137 0.112 Period 13 0379 0.773 0681 0.001 0.530 040904150368 0 326 0.200 0.229 01820.163 0.145 0.116 0.093 Period 14 0.870 0.758 0.881 0.577 05050.4420380340 0.299 0.263 0.205 0 1000.141 0.125 0.000 0.078 Period 15 0 861 0.743 0.542 0.555 0,4810417 0362 0315 0.275 0.2390 183 0.140 0.123 0108 00540065 Period 16 0853 0.728 0823 0.534 0.458 0.394 0.3390 292 0252 0218 0.163 0.123 0.107 0.003 00710054 Period 17 0 844 0714 06050 513 0.4360371 0317 0270 0 231 0 198 0.146 0.108 0.003 0.080 0.060 0045 Period 18 0836 0700 0.587 0.494 0416 0.3500 2000 250 0.212 0.180 0 130 0.095 0081 0.089 0.051 0.038 Period 19 0828 0836 0 570 0.475 0.396 0.331 0.277 0232 0.194 0.164 0.116 0.003 0.070 0.050 0043 0031 Period 20 0 820 0.673 05540 456 03770312 0 2580215 0.178 0.149 0.104 0.073 0061 0051 0037 0028 Period 21 08110060 0.538 0.430 0359 0.2040.242 0.1990.164 0.135 0.093 0.064 0.053 0044 0031 0.022 Period 220 al 0.6420 522 10 4220342 1078 10 240 1840 150 0.123 0.03 0.05 0.046 1.0.03 0.02 0.018 10 0 alculat o de Jan B Years 1 - 10 Print Done hoose X i Reference 2% 4% Present Value of Ordinary Annuity of $1 Periods 1% 3% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% Period 1 0.990 0.9800.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0 847 0.833 Period 2 1.970 1.942 1913 1.886 1.859 1833 1,808 1.7831.759 1.736 1.690 1 647 1.626 1.605 1.566 1.528 Period 3 2.9412.884 2.829 2.775 2.7232 673 2.624 2.577 2 531 2487 2.402 2322 2283 2246 2 174 2.106 Period 4 3.9023 808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.1703037 2.914 2855 2.798 2 690 2.589 Period 5 4.853 4 713 4.580 4.452 4.329 4 212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 3 274 3.127 2.991 Period 6 5.795 5.601 5 417 5.242 5.078 4.917 4 767 4.623 4.486 4 355 4.111 3.889 3.784 3.685 3.498 3.326 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5 206 5,033 4.868 45644 288 4.160 4.039 3.812 3.605 Period 8 7.652 7325 7020 6.733 6 483 6.210 5.971 5 747 5535 5.335 4968 4639 487 4344 4.078 3.837 Period 9 8.566 8.1627.786 7.435 7 108 6.802 6.515 6.247 5.995 5.759 5 328 4.946 4.772 4 607 4 303 4031 Period 10 9.471 8.9838.530 8 111 7.722 7360 7024 6.710 6.418 6.145 5.650 5216 5,019 4833 4 494 4.192 Period 11 10.368 9.787 9.253 8.760 8 306 7 887 7499 7 139 6.805 6.495 5.938 5.453 5.234 5029 4.656 4.327 Period 12 11 255 10.575 9.954 9.385 8.863 8.384 7943 7.538 7 1616.814 6 194 5.660 5.421 5.197 4.793 4439 Period 13 12.134 11 348 10.635 9.988 9.394 8.853 8 358 7904 7487 7103 6.424 5,842 5.583 5.342 4.910 4533 Period 14 13.004 12 106 11 296 10 563 9.899 9 295 8.745 8.2447 786 7367 6 628 6.002 5.724 5.468 5008 4.611 Period 15 13.865 12 849 11.938 11.118 10 3809712 9.108 8559 80617 606 6.811 6.142 5847 5.575 5.092 4675 Period 16 14 718 13.578 12 561 11 652 10 838 10.106 9.447 88518 313 7 824 6.974 6.265 5.954 5 669 5.162 4730 Period 17 15562 14.292 13.166 12 166 11.274 10.477 9.763 9.122 8.544 8.0227 120 6373 6047 5.749 5222 4.775 Period 18 16 398 14.992 13.754 12659 11.690 10 828 10 059 9 372 8.756 8 2017 250 6.467 6.128 5.818 5273 4812 Period 19 17 226 15.678 14324 13.134 12.085 11 158 10 336 9.604 8.950 8.385 7366 6.550 6.198 5.877 5.316 4844 Period 20 18 046 16.351 14.877 13 590 12.462 11 470 10 594 9.818 9.129 8.5147469 0.623 6.259 5.929 5.353 4870 Period 21 18 857 17 011 15.415 14.029 12.821 11.764 10.836 10.0179.292 8.6497562 8.687 6.312 5973 5 384 4.891 Print Done - X Reference Future Value of $1 6% Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 1% 2% 3% 4% 5% 7% 8% 9% 10% 12% 14% 15% 1.010 1.020 1.030 1.040 1.050 1.060 1070 1.080 1.090 1.100 1.120 1.140 1.150 1.020 1.040 1.061 1.082 1.103 1.124 1.145 1.166 1.188 1210 1.254 1300 1323 1.030 1.061 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1331 1.405 1.482 1521 1.041 1.0821.126 1.170 1.216 1.262 1.311 1360 1.412 1.464 1.574 1689 1.749 1.051 1.104 1.159 1217 1.276 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 1.062 1.126 1.1941.265 1340 1.419 1.501 1.587 1.6771.772 1.974 2.195 2313 1.072 1.149 1.2301.316 1.407 1504 1.606 17141.828 1.949 2211 2.502 2.660 1.083 1.172 1.267 1.369 1.477 1594 1.718 1.851 1.993 2144 2476 2 853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.7733.252 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 1243 1.384 1.539 1710 1.898 2.105 2332 2 580 2.853 3.479 4.226 4,652 1.127 1.268 1.426 1.601 1796 2012 2252 2518 2813 3.138 3.896 4818 5.350 1.138 1 294 1.469 1.665 1886 2133 2.410 2720 3.066 3.452 4.363 5.492 6.153 1.149 1.319 1.513 1.732 1.980 2261 2.579 2.937 3.342 3.798 4.887 6.261 7076 1.161 1 346 1.558 1.801 2.079 2397 2759 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 3.1593.700 4.328 5.054 6,866 9.276 10.76 1.196 1.428 1.702 2026 2407 2854 3.380 3.996 4.717 5.560 7.690 10.58 1238 1.208 1.457 1.754 2107 2527 3.026 3 817 4.316 5.142 6.116 8.613 12.06 14.23 1 220 1486 1.806 2 191 2653 3.207 3.870 4.661 5.6046.727 9.646 13.74 16.37 1 232 1.516 18602279 2786 3.400 4.141 5.034 6.109 7400 10.80 15.67 18.82 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Print Done - X Reference Perods Period 1 Period 2 Period 3 Period 4 Period 5 et apl all Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Future Value of Ordinary Annuity of $1 1% 2% 3% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1 000 1.000 1000 1000 1.000 1.000 1 000 1.000 1.000 1.000 1.000 1.000 1.000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2.100 2.120 2.140 2 150 3.0303.060 3.091 3.122 3.153 3.1843.215 3.246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 41844.2464.310 4.375 4440 4.506 4.573 4.641 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5,637 5751 5 867 5985 6.105 6.353 6.610 6.742 6.1526.308 6.488 6.633 6802 6.975 7 153 73367.5237 716 8.115 8,536 8.754 7214 7.4347682 7.898 8.1428.394 8 654 8.9239.2009.487 10.09 10.73 11.07 8.286 8.583 8.8929.2149549 9.897 10.260 10.64 1103 11.44 12 30 13 23 1373 9 369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 13.58 14 78 1609 16.79 10.46 10.95 11.46 12.01 12:58 13 18 13.82 14.49 15 19 15.94 1755 19.34 20 30 11.57 12 17 12 81 13.49 14.21 14.97 1578 16.65 1756 18.53 20 65 23.0424 35 12 68 13.41 14.19 15.03 15.9216.87 17 89 18.98 20 14 21 38 24 13 27.27 29 00 13 81 14 68 15 62 16.63 17.71 18 88 20.14 21.50 22 95 2452 28.03 32 09 34 35 14.95 15 97 17 09 18.29 19.60 21.02 22 55 24 21 20.02 27.98 3239 37.58 40.50 16.10 17 2918 60 20.02 21.58 23.28 25 13 27 15 29 36 31.77 37 28 43.8447 58 17 26 18 64 20.16 21.82 23.66 25 67 27.89 30 32 33.00 35.95 42.75 50 98 55 72 18.43 20 0121.76 23.70 25.84 2821 30.84 33.75 36.97 40.54 48.88 59 12 6508 19.61 2141 23 41 25 65 28.13 30.9134.00 37 4541 30 45.60 55.75 68 39 75.84 20.81 22.84 25 12 27 67 30.54 33.76 37 38 41 45 46.02 51.16 63.44 78,97 88.21 22 02 24 30 26 87 29.7833.07 36.79 41.00 45.7651.16 5728 72.05 91 02 1024 23 24 25.7828.68 3197 3572 39.99 44.87 50 42 56.76 64.00 81.70 104.8 118.8 2447 97.3 2054 24 26 20.51 41.30 40 56 ARIA 7440 02. MA1278 wall of est ent of PM Period 16 Period 17 Period 18 Period 19 Period 20 S. Period 21 David val Print Done sto Calculate the NPV of Plan (Complete all answer boxes Enter a "O for any zero balances of 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 not present value Present Value Plan B: Net Cash Annuity PV Factor PV Factor Years Inflow (-10%, n 101 (110%, 10) 110 Present of annuity 10 Prosent value of residual value Total PV of cash intow 0 Initial Investment Not present value of Plan Calculate the profitability index of these two plans (Round to two decimal pocos XXX Protably index Plan A Plan 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 one of the weaknesses of the other models is easy to understand is based on cash flows and highlights risks However, it ignoros 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 prosent 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? because it has a ARR V profitability index 7 nayback penod, a Lolus Company should invest in not present value inda Requirement 4. Estimate Plan A the RR compare with the company's required rate of return? The IRR internal rate of return) Plan Plans This the company's hurdle rate of 10% finnist or enter any number in the input fields and then continue to the next question ins i More Info ate o The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,550,000. Expected annual net cash inflows are $1,625,000 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 $8,000,000 This plan is expected to generate net cash inflows of $1,100,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,300,000. Lulus Company uses straight line depreciation and requires an annual return of 10%. for any ze bra negativ t value ne plan Print Done Blue

Answer & Explanation Solved by verified expert

See Answer