15.

Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows:

Initial investment	$	170,000
Useful life	$	10	years
Salvage value		20,000
Annual net income generated	$	4,000
FCA's cost of capital		8	%

Assume straight line depreciation method is used.

Questions

a. Accounting rate of return? _____% (round to 2 decimal places

b. Help FCA evaluate this project by calculating each of the following: Payback period. (Round your answer to 2 decimal places.) Payback period____?

c. Help FCA evaluate this project by calculating each of the following: Net present value (NPV). (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. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)

Net PResent Value _______?

D. Help FCA evaluate this project by calculating each of the following: Recalculate FCA's NPV assuming the cost of capital is 3 percent. (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. Round your final answer to the nearest whole dollar amount.)

E. Without doing any calculations, what is the project's IRR? MULTIPLE CHOICE

A. GREATER THEN 8%,

B. BETWEEN 3-8%

C. LESS THAN 3%