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. $ 409,000 $ 57,000 $ 32,311 8 years 74 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 10 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.
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. $ 409,000 $ 57,000 $ 32,311 8 years 74 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 10 percent. Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
$ 409,000
$ 57,000
$ 32,311
79
8 years
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 10 percent.
Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to
nearest whole dollar.
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