Considering the purchase of two new hot air balloons

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Reference no: EM132059340

Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: Initial investment (for two hot air balloons) $ 354,000 Useful life 8 years Salvage value $ 50,000 Annual net income generated 32,214 BBS’s cost of capital 9 % Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. (Round your answer to 1 decimal place.) 2. Payback period. (Round your answer to 2 decimal places.) 3. Net present value (NPV). (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) 4. Recalculate the NPV assuming BBS's cost of capital is 12 percent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)

Reference no: EM132059340

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