Considering two possible expansion plans

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Question

The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,425,000. 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, Locos Company would open three larger shops at a cost of $8,240,000. This plan is expected to generate net cash inflows of $1,000,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,300,000. Locos Company uses straight-line depreciation and requires an annual return of 8%.

Reference no: EM133674229

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