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1. Accounting rate of return. 2. Payback period. 3. Net present value (NPV).

1. Accounting rate of return. 2. Payback period. 3. Net present value (NPV).

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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BALLOONS BY SUNSET Investment information: Initial investment (for two hot air balloons) $ Useful life Salvage value Annual net income generated HAH's cost of capital Additional information: Cost of capital for Requirement 4 $ 420,000 10 50,000 37,800 11% 15% Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payback period. 3. Net present value (NPV). 4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. 5. Based on your calculation of NPV, what would you estimate the project's internal rate of return to be?
Transcribed Image Text:BALLOONS BY SUNSET Investment information: Initial investment (for two hot air balloons) $ Useful life Salvage value Annual net income generated HAH's cost of capital Additional information: Cost of capital for Requirement 4 $ 420,000 10 50,000 37,800 11% 15% Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payback period. 3. Net present value (NPV). 4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. 5. Based on your calculation of NPV, what would you estimate the project's internal rate of return to be?
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