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More info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,410,000. 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, 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 $1,300,000. Limes Company uses straight-line depreciation and requires an annual return of 7%. Limes Company operates a chain of sandwich shops. (Click the icon to view Present Value of $1 (Click the icon to view additional information.) table.) 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 Ordinarv 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.) Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X. X%.) Caclulate 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 annly to the nlan Fotan A. (Complete alil answer Caclulate 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.XXX. Use parentheses or a minus sign for a negative net present value.) Calculate the NPV of Plan B. (Complete all answer boxes. Enter a " 0 " for any zero balances or amounts that do not 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.) Calculate the profitability index of these two plans. (Round to two decimal places X.XX.) 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 canital budgeting models Requirement 2. What are the strengths and weaknesses of these capital budgeting methods? Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Company should invest in because it has a payback period, a ARR, a present value, and a profitability index. 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 return) of Plan A is between This rate the company's hurdle rate of 7%. 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 derimal nlara YY ) calculating the NPV of Plan A. (Complet not apply to the plan. Enter any factor am a negative net present value.) Calculate the profitability index of these two plans. (Round to fwn derimal nlaree X I 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. Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Company should invest in because it has a payback period, a present value, and a pro Requirement 4. Estimate Plan A: 1e IRR compare with the company's required ra Plan A The IRR (internal rate of return) Plan B This rate the d ate of 7%. Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Company should invest in because it has a payback period, a ARR, a present value, and a profitability index. Requirement 4. Estimate Plan A's IRR. How does the IRR c impany's required rate of return The IRR (internal rate of return) of Plan A is between longer This rate shorter the company's hurdle rate of 7 ; Requirement 3. Which expansion plan should Limes Company choose? Why? Requirement 4. Estimate Plan A's IRR. How does the IRR compare with the company's The IRR (internal rate of return) of Plan A is between higher This rate the company's hurdle rate of 7% lower ement 3. Which expansion plan should Limes Company choose? Why? Company should invest in because it has a payback period, a ARR, a net t value, and a profitability index. rement 4. Estimate Plan A's IRR. How does the IRR compare with the company's require RR (internal rate of return) of Plan A is between higher lower the company's hurdle rate of 7%. Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Company should invest in because it has a payback period, a present value, and a profitability irR, a Requirement 4. Estir How does the IRR compare with the company's required rate of retum? The IRR (internal rate A is between higher This rate ny's hurdle rate of 7%. lower It allows us to con 8%9% itments in present value terms and it also accounts for differ nts' initial cost. It has none of the weaknesses of the 9%10% Requirement 3. Which expansion plan should Limes 10%12% hy? Requirement 4. Estimate Plan A's IRR. How does the 14%15% e company's required rate of return? The IRR (internal rate of return) of Plan A is between This rate the company's hurdle rate of 7%. Requirement 3. Which expansion plan should Limes Company choose? Why? Limes Co because it has a payback period, a ARR, a present vi lity index. Requiren does not exceed . How does the IRR compare with the company's required rate of retur The IRR ( exceeds nA is between This rate the company's hurdle rate of 7%

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