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P26-36B Using payback, ARR, NPV, IRR, and profitability index to make capital investment decisions Howard...

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P26-36B Using payback, ARR, NPV, IRR, and profitability index to make capital investment decisions Howard Company operates a chain of sandwich shops. The company is consider- ing two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,500,000. Expected annual net cash inflows are $1,600,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Howard Company would open three larger shops at a cost of $8,100,000. This plan is expected to generate net cash inflows of $1,000,000 per year for 10 years, which is the estimated useful life of the properties. Estimated residual value for Plan B is $990,000. Howard Company straight-line depreciation and requires an annual return of 6% uses

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