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Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. 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). $ 449,000 9 years $ 44,000 $ 39,961. 11%

Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. 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). $ 449,000 9 years $ 44,000 $ 39,961. 11%

Essentials Of Investments
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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Vikram Bhai 

Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. 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). $ 449,000 9 years $ 44,000 $ 39,961. 11% 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 14 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. Answer is complete but not entirely correct. 1. Accounting rate of return 8.90 % 2. Payback period 5.28 years 3. Net present value $ 38,630 4. Net present value assuming 14% cost of capital $ (14,668) X
Transcribed Image Text:Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. 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). $ 449,000 9 years $ 44,000 $ 39,961. 11% 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 14 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. Answer is complete but not entirely correct. 1. Accounting rate of return 8.90 % 2. Payback period 5.28 years 3. Net present value $ 38,630 4. Net present value assuming 14% cost of capital $ (14,668) X
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