Dilliards Company is considering two possible expansion plans:

Plan A:

Plan A would expand a current product line at a cost of $8,600,000. Expected annual net cash inflows are $1,525,000, with zero residual value at the end of 10 years.

Plan B:

Plan B would be to begin producing a new product 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 product line. Estimated residual value for Plan B is $980,000. Dilliards uses straight-line depreciation and requires an annual return of 10%.

Requirements Complete The Following Calculations Using the Excel Worksheet Provided: Compute the Payback Period and the Annual Accounting Rate of Return,

Rank the plans and make a recommendation to Dilliard Companys top management team for the best plan. Which expansion plan should be accepted? Why? Explain your answer by comparing and contrasting the calculations for each alternative.