Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payback period. (Round your answer to 2 decimal places.) 3. Net present value (NPV). (Round the final answer to nearest whole dolla 4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. (Negat whole dollar)
Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payback period. (Round your answer to 2 decimal places.) 3. Net present value (NPV). (Round the final answer to nearest whole dolla 4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. (Negat whole dollar)
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4PB
Related questions
Question
Please answer 2,3,4
![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.) (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.
$ 420,000
1. Accounting rate of return
2. Payback period
10 years
3. Net present value
4. Net present value assuming 15% cost of capital
$ 50,000
Assume straight line depreciation method is used.
Required:
Help BBS evaluate this project by calculating each of the following:
37,800
11%
1. Accounting rate of return.
2. Payback period. (Round your answer to 2 decimal places.)
3. Net present value (NPV). (Round the final answer to nearest whole dollar.)
4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. (Negative amount should be indicated by a minus sign. Round
the final answer to nearest whole dollar.)
%
years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8728aee7-89a8-4622-85c7-8867d7660ec0%2F6426024e-a19f-4c9c-92e8-d9f63f511ab7%2Fkr0rsca_processed.jpeg&w=3840&q=75)
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: (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value
Annuity of $1.) (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.
$ 420,000
1. Accounting rate of return
2. Payback period
10 years
3. Net present value
4. Net present value assuming 15% cost of capital
$ 50,000
Assume straight line depreciation method is used.
Required:
Help BBS evaluate this project by calculating each of the following:
37,800
11%
1. Accounting rate of return.
2. Payback period. (Round your answer to 2 decimal places.)
3. Net present value (NPV). (Round the final answer to nearest whole dollar.)
4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. (Negative amount should be indicated by a minus sign. Round
the final answer to nearest whole dollar.)
%
years
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