TABLE 11.2A Present Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573 0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.8885 0.8631 0.8548 0.8466 0.8227 0.7921 0.7629 0.7350 0.9057 0.8626 0.8319 0.8219 0.8121 0.7835 0.7473 0.7130 0.6806 0.8880 0.8375 0.8018 0.7903 0.7790 0.7462 0.7050 0.6663 0.6302 0.8706 0.8131 0.7728 0.7599 0.7473 0.7107 0.6651 0.6227 0.5835 0.8535 0.7894 0.7449 0.7307 0.7168 0.6768 0.6274 0.5820 0.5403 0.8368 0.7664 0.7180 0.7026 0.6876 0.6446 0.5919 0.5439 0.5002 10 0.8203 0.7441 0.6920 0.6756 0.6595 0.6139 0.5584 0.5083 0.4632 20 0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 0.2145 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.6944 0.6400 3 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.5787 0.5120 4 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.4823 0.4096 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 3277 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.2791 0.2097 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.1938 0.1342 10 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.1615 0.1074 20 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0261 0.0115 LO TABLE 11.4A Present Value of Annuity of $1 Periods* e 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 1.9416 1.9135 1.8929 1.8861 1.8794 1.8594 1.8334 1.8080 1.7833 3 2.8839 2.8286 2.7883 2.7751 2.7620 2.7232 2.6730 2.6243 2.5771 4 3.8077 3.7171 3.6514 3.6299 3.6086 3.5460 3.4651 3.3872 3.3121 4.7135 4.5797 4.4833 4.4518 4.4207 4.3295 4.2124 4.1002 3.9927 5.6014 5.4172 5.2851 5.2421 5.1997 5.0757 4.9173 4.7665 4.6229 6.4720 6.2303 6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5.2064 7.3255 7.0197 6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466 8.1622 7.7861 7.5208 7.4353 7.3513 7.1078 6.8017 6.5152 6.2469 10 8.9826 8.5302 8.2128 8.1109 8.0109 77217 7.3601 7.0236 6.7101 20 16.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181 Periods* O 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.9009 0.8929 0.8550 0.8772 0.8696 0.8333 0.8000 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.5278 1.4400 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.1065 1.9520 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.5887 2.3616 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 2.9906 2.6893 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.3255 2.9514 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 3.6046 3.1611 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 3.8372 3.3289 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.0310 3.4631 10 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.1925 3.5705 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 4.8696 3.9539 "There is one payment each period. LO 6, LO 20 4.
TABLE 11.2A Present Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573 0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.8885 0.8631 0.8548 0.8466 0.8227 0.7921 0.7629 0.7350 0.9057 0.8626 0.8319 0.8219 0.8121 0.7835 0.7473 0.7130 0.6806 0.8880 0.8375 0.8018 0.7903 0.7790 0.7462 0.7050 0.6663 0.6302 0.8706 0.8131 0.7728 0.7599 0.7473 0.7107 0.6651 0.6227 0.5835 0.8535 0.7894 0.7449 0.7307 0.7168 0.6768 0.6274 0.5820 0.5403 0.8368 0.7664 0.7180 0.7026 0.6876 0.6446 0.5919 0.5439 0.5002 10 0.8203 0.7441 0.6920 0.6756 0.6595 0.6139 0.5584 0.5083 0.4632 20 0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 0.2145 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.6944 0.6400 3 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.5787 0.5120 4 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.4823 0.4096 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 3277 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.2791 0.2097 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.1938 0.1342 10 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.1615 0.1074 20 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0261 0.0115 LO TABLE 11.4A Present Value of Annuity of $1 Periods* e 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 1.9416 1.9135 1.8929 1.8861 1.8794 1.8594 1.8334 1.8080 1.7833 3 2.8839 2.8286 2.7883 2.7751 2.7620 2.7232 2.6730 2.6243 2.5771 4 3.8077 3.7171 3.6514 3.6299 3.6086 3.5460 3.4651 3.3872 3.3121 4.7135 4.5797 4.4833 4.4518 4.4207 4.3295 4.2124 4.1002 3.9927 5.6014 5.4172 5.2851 5.2421 5.1997 5.0757 4.9173 4.7665 4.6229 6.4720 6.2303 6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5.2064 7.3255 7.0197 6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466 8.1622 7.7861 7.5208 7.4353 7.3513 7.1078 6.8017 6.5152 6.2469 10 8.9826 8.5302 8.2128 8.1109 8.0109 77217 7.3601 7.0236 6.7101 20 16.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181 Periods* O 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.9009 0.8929 0.8550 0.8772 0.8696 0.8333 0.8000 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.5278 1.4400 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.1065 1.9520 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.5887 2.3616 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 2.9906 2.6893 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.3255 2.9514 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 3.6046 3.1611 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 3.8372 3.3289 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.0310 3.4631 10 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.1925 3.5705 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 4.8696 3.9539 "There is one payment each period. LO 6, LO 20 4.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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) | $ | 423,000 | |
| Useful life | 9 | years | |
| Salvage value | $ | 54,000 | |
| Annual net income generated | 32,571 | ||
| BBS’s cost of capital | 11 | % | |
Assume
Required:
Help BBS evaluate this project by calculating each of the following:
1. Accounting
2. Payback period. (Round your answer to 2 decimal places.)
3.
4. Recalculate the NPV assuming BBS's cost of capital is 14 percent. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)
Transcribed Image Text:TABLE 11.2A Present Value of $1
Periods
2%
3%
3.75%
4%
4.25%
5%
6%
7%
8%
0.9804 0.9709
0.9639 0.9615
0.9592 0.9524 0.9434 0.9346 0.9259
0.9612 0.9426
0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573
0.9423 0.9151
0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938
4
0.9238 0.8885
0.8631
0.8548 0.8466 0.8227 0.7921
0.7629 0.7350
0.9057 0.8626 0.8319
0.8219
0.8121
0.7835 0.7473
0.7130
0.6806
0.8880 0.8375
0.8018
0.7903 0.7790 0.7462 0.7050 0.6663 0.6302
0.8706 0.8131
0.7728
0.7599 0.7473
0.7107
0.6651 0.6227 0.5835
0.8535 0.7894
0.7449 0.7307 0.7168
0.6768 0.6274 0.5820 0.5403
0.8368 0.7664
0.7180
0.7026 0.6876 0.6446 0.5919
0.5439 0.5002
10
0.8203 0.7441
0.6920 0.6756 0.6595 0.6139
0.5584 0.5083 0.4632
20
0.6730 0.5537
0.4789 0.4564 0.4350 0.3769 0.3118
0.2584 0.2145
Periods
9%
10%
11%
12%
13%
14%
15%
20%
25%
0.9174
0.9091
0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000
0.8417
0.8264
0.8116
0.7972 0.7831
0.7695 0.7561
0.6944 0.6400
3
0.7722
0.7513
0.7312
0.7118
0.6931
0.6750 0.6575 0.5787 0.5120
4
0.7084 0.6830
0.6587 0.6355 0.6133
0.5921 0.5718
0.4823 0.4096
0.6499 0.6209
0.5935 0.5674 0.5428 0.5194
0.4972 0.4019
3277
0.5963 0.5645
0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621
0.5470 0.5132
0.4817
0.4523 0.4251 0.3996 0.3759 0.2791 0.2097
0.5019
0.4665
0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678
0.4604 0.4241
0.3909 0.3606 0.3329 0.3075 0.2843 0.1938
0.1342
10
0.4224 0.3855
0.3522 0.3220 0.2946 0.2697 0.2472 0.1615
0.1074
20
0.1784
0.1486
0.1240
0.1037
0.0868 0.0728 0.0611
0.0261 0.0115
LO
Transcribed Image Text:TABLE 11.4A Present Value of Annuity of $1
Periods* e
2%
3%
3.75%
4%
4.25%
5%
6%
7%
8%
0.9804
0.9709
0.9639
0.9615
0.9592 0.9524
0.9434
0.9346 0.9259
1.9416
1.9135
1.8929
1.8861
1.8794
1.8594
1.8334
1.8080
1.7833
3
2.8839
2.8286
2.7883
2.7751
2.7620
2.7232
2.6730
2.6243
2.5771
4
3.8077
3.7171
3.6514
3.6299
3.6086 3.5460
3.4651
3.3872
3.3121
4.7135
4.5797
4.4833
4.4518
4.4207 4.3295
4.2124
4.1002 3.9927
5.6014
5.4172
5.2851
5.2421
5.1997
5.0757
4.9173
4.7665 4.6229
6.4720
6.2303
6.0579
6.0021
5.9470
5.7864
5.5824 5.3893 5.2064
7.3255
7.0197
6.8028
6.7327
6.6638
6.4632 6.2098
5.9713
5.7466
8.1622
7.7861
7.5208
7.4353
7.3513
7.1078
6.8017
6.5152 6.2469
10
8.9826
8.5302
8.2128
8.1109
8.0109
77217
7.3601
7.0236
6.7101
20
16.3514
14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940
9.8181
Periods* O
10%
11%
12%
13%
14%
15%
20%
25%
0.9174
0.9091
0.9009
0.8929
0.8550
0.8772
0.8696
0.8333 0.8000
1.7591
1.7355
1.7125
1.6901
1.6681
1.6467
1.6257
1.5278
1.4400
2.5313
2.4869
2.4437
2.4018
2.3612
2.3216
2.2832
2.1065
1.9520
3.2397
3.1699
3.1024
3.0373
2.9745
2.9137 2.8550 2.5887
2.3616
3.8897
3.7908
3.6959
3.6048
3.5172
3.4331
3.3522 2.9906 2.6893
4.4859
4.3553
4.2305
4.1114
3.9975 3.8887
3.7845
3.3255
2.9514
5.0330
4.8684
4.7122
4.5638
4.4226 4.2883
4.1604
3.6046
3.1611
5.5348
5.3349
5.1461
4.9676
4.7988
4.6389
4.4873
3.8372 3.3289
5.9952
5.7590
5.5370
5.3282
5.1317
4.9464
4.7716
4.0310
3.4631
10
6.4177
6.1446
5.8892
5.6502
5.4262
5.2161
5.0188
4.1925
3.5705
9.1285
8.5136
7.9633
7.4694
7.0248
6.6231
6.2593 4.8696 3.9539
"There is one payment each period.
LO
6,
LO
20
4.
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