4 points Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] 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: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life eBook Salvage value BBS's cost of capital Annual net income generated References Assume straight line depreciation method is used. $ 464,000 8 years $ 48,000 $ 35,728 8% Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: 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 11 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 1. Accounting rate of return 2. Payback period 3. Net present value 4. Net present value assuming 11% cost of capital % years
4 points Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] 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: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life eBook Salvage value BBS's cost of capital Annual net income generated References Assume straight line depreciation method is used. $ 464,000 8 years $ 48,000 $ 35,728 8% Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: 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 11 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 1. Accounting rate of return 2. Payback period 3. Net present value 4. Net present value assuming 11% cost of capital % years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4]
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: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value
Annuity of $1.)
Note: Use appropriate factor(s) from the tables provided.
Initial investment (for two hot air balloons)
Useful life
eBook
Salvage value
BBS's cost of capital
Annual net income generated
References
Assume straight line depreciation method is used.
$ 464,000
8 years
$ 48,000
$ 35,728
8%
Required:
Help BBS evaluate this project by calculating each of the following:
1. Accounting rate of return.
Note: Round your answer to 2 decimal places.
2. Payback period.
Note: Round your answer to 2 decimal places.
3. Net present value (NPV).
Note: 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 11 percent.
Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to
nearest whole dollar.
1. Accounting rate of return
2. Payback period
3. Net present value
4. Net present value assuming 11% cost of capital
%
years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5295a17a-0a9a-422a-b936-de2897950c1a%2F274ad75c-167c-451d-9617-f01df3b2a33b%2F9l1ukc4_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4
points
Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4]
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: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value
Annuity of $1.)
Note: Use appropriate factor(s) from the tables provided.
Initial investment (for two hot air balloons)
Useful life
eBook
Salvage value
BBS's cost of capital
Annual net income generated
References
Assume straight line depreciation method is used.
$ 464,000
8 years
$ 48,000
$ 35,728
8%
Required:
Help BBS evaluate this project by calculating each of the following:
1. Accounting rate of return.
Note: Round your answer to 2 decimal places.
2. Payback period.
Note: Round your answer to 2 decimal places.
3. Net present value (NPV).
Note: 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 11 percent.
Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to
nearest whole dollar.
1. Accounting rate of return
2. Payback period
3. Net present value
4. Net present value assuming 11% cost of capital
%
years
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