By iset (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. Euture Value Annulty of $1. Present Value Annulty. of $1) (Use appropriate factor(s) from the tables provided.) Initial investment (for two hot air balloons). Useful life Salvage value Annual net incone generated: BBS's cost of capital $ 440,000 7 years $ 55,000 34,760 7% 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 2 decimal places.) 2. Payback period. (Round your answer to 2 decimal pleces.) 3. Net present value (NPV). (Do not round intermediate calculetions. Negative amount should be indicated by a minus sign. Round the final answer to neorest whole dollar.) 4. Recalculate the NPV assuming BBS's cost of capital is 10 percent (Do not round intermediate colculations. Negetive amount should be indicated by a minus sign. Round the final answer to nearest whole doller.)
By iset (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. Euture Value Annulty of $1. Present Value Annulty. of $1) (Use appropriate factor(s) from the tables provided.) Initial investment (for two hot air balloons). Useful life Salvage value Annual net incone generated: BBS's cost of capital $ 440,000 7 years $ 55,000 34,760 7% 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 2 decimal places.) 2. Payback period. (Round your answer to 2 decimal pleces.) 3. Net present value (NPV). (Do not round intermediate calculetions. Negative amount should be indicated by a minus sign. Round the final answer to neorest whole dollar.) 4. Recalculate the NPV assuming BBS's cost of capital is 10 percent (Do not round intermediate colculations. Negetive amount should be indicated by a minus sign. Round the final answer to nearest whole doller.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Answer only first two subparts
Transcribed Image Text: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: (Euture Value of $1. Present Value of $1. Euture Value Annulty of $1. Present Value
Annulty.of $1) (Use appropriate factor(e) from the tables provided.)
Initial investment (for two hot air balloons)
Useful life
Salvage value
Annual net income generated
BBS's cost of capital
$ 440,000
7 years
$ 55,000
34,76e
7%
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 2 decimal places.)
2. Payback period. (Round your answer to 2 decimal places.)
3. Net present value (NPV). (Do not round intermediate calculetions. Negative amount should be indicated by a minus sign. Round
the final answer to nearest whole doller.)
4. Recalculate the NPV assuming BBS's cost of capital is 10 percent (Do not round intermediate colculations. Negetive amount
should be indicated by a minus sign. Round the final answer to nearest whole doller.)
Transcribed Image Text:evaluäte this project by calculating each of the following:
1. Accounting rate of return. (Round your enswer to 2 decimel pleces.)
2 Payback period. (Round your enswer to 2 decimel pleces.)
3. Net present value (NPV). (Do not round intermediate calculetions. Negative amount should be indicated by a minus sign. Round
the final answer to nearest whole doller.)
4. Recalculate the NPV assuming BBSS cost of capital is 10 percent. (Do not round intermediate calculetions. Negetive amount
should be indicated by a minus sign. Round the final answer to nearest whole doller.)
1 Accounting rate of return
2 Payback period
3. Net present value
4 Net present value assuming 10% cost of capital
years
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