6. Ocean World is considering purchasing a water park in Charlotte, North Carolina, for $2,100,000. The new facility will generate annual net cash inflows of $535,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of 10% or more. Management uses a 12% hurdle rate on investments of this nature. 8 (Click the icon to view the present value annuity table.) 9 (Click the icon to view the present value table.) 10 (Click the icon to view the future value annuity table.) 11 (Click the icon to view the future value table.) Read the requirements12. Requirement 1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment. (If you use the tables to compute the IRR, answer with the closest interest rate shown in the tables.) (Round the payback period to one decimal place.) The payback period is years. (Round the percentage to the nearest tenth percent.) The ARR (accounting rate of return) is %. (Round your answer to the nearest whole dollar.) Net present value $ The IRR (internal rate of return) is between (1) . Requirement 2. Recommend whether the company should invest in this project. Recommendation: (2) 8: Reference Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 2 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.605 1.566 1.528 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.246 2.174 2.106 4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.991 6 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 8 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 9 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.759 5.328 4.946 4.607 4.303 4.031 10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 5.197 4.793 4.439 13 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 14 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.367 6.628 6.002 5.468 5.008 4.611 15 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.606 6.811 6.142 5.575 5.092 4.675 20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 6.623 5.929 5.353 4.870 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 6.097 5.467 4.948 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 6.177 5.517 4.979 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 7.105 6.233 5.548 4.997 9: Reference Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 3 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 11 0.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 20 0.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 10: Reference Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2 2.010 2.020 2.030 2.040 2.050 2.060 2.080 2.100 2.120 2.140 2.160 3 3.030 3.060 3.091 3.122 3.153 3.184 3.246 3.310 3.374 3.440 3.506 4 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 6 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 8.536 8.977 7 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 1 8 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 12.300 13.233 14.240 1 9 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 16.085 17.519 1 10 10.462 10.950 11.464 12.006 12.578 13.181 14.487 15.937 17.549 19.337 21.321 2 11 11.567 12.169 12.808 13.486 14.207 14.972 16.645 18.531 20.655 23.045 25.733 2 12 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 27.271 30.850 3 13 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 32.089 36.786 4 14 14.947 15.974 17.086 18.292 19.599 21.015 24.215 27.975 32.393 37.581 43.672 5 15 16.097 17.293 18.599 20.024 21.579 23.276 27.152 31.772 37.280 43.842 51.660 6 20 22.019 24.297 26.870 29.778 33.066 36.786 45.762 57.275 72.052 91.025 115.380 1 25 28.243 32.030 36.459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 249.214 3 30 34.785 40.568 47.575 56.085 66.439 79.058 113.283 164.494 241.333 356.787 530.312 7 40 48.886 60.402 75.401 95.026 120.800 154.762 259.057 442.593 767.091 1,342.025 2,360.757 4, 11: Reference Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 1 1.010 1.020 1.030 1.040 1.050 1.060 1.080 1.100 1.120 1.140 1.160 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 1.210 1.254 1.300 1.346 3 1.030 1.061 1.093 1.125 1.158 1.191 1.260 1.331 1.405 1.482 1.561 4 1.041 1.082 1.126 1.170 1.216 1.262 1.360 1.464 1.574 1.689 1.811 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 1.611 1.762 1.925 2.100 6 1.062 1.126 1.194 1.265 1.340 1.419 1.587 1.772 1.974 2.195 2.436 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 1.949 2.211 2.502 2.826 8 1.083 1.172 1.267 1.369 1.477 1.594 1.851 2.144 2.476 2.853 3.278 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 2.773 3.252 3.803 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 3.106 3.707 4.411 11 1.116 1.243 1.384 1.539 1.710 1.898 2.332 2.853 3.479 4.226 5.117 12 1.127 1.268 1.426 1.601 1.796 2.012 2.518 3.138 3.896 4.818 5.936 13 1.138 1.294 1.469 1.665 1.886 2.133 2.720 3.452 4.363 5.492 6.886 14 1.149 1.319 1.513 1.732 1.980 2.261 2.937 3.797 4.887 6.261 7.988 1 15 1.161 1.346 1.558 1.801 2.079 2.397 3.172 4.177 5.474 7.138 9.266 1 20 1.220 1.486 1.806 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 2 25 1.282 1.641 2.094 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 6 30 1.348 1.811 2.427 3.243 4.322 5.743 10.063 17.449 29.960 50.950 85.850 1 40 1.489 2.208 3.262 4.801 7.040 10.286 21.725 45.259 93.051 188.884 378.721 7 12: Requirements 1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment. (If you use the tables to compute the IRR, answer with the closest interest rate shown in the tables.) 2. Recommend whether the company should invest in this project. (1) 16% and 18% 20% and 22% 22% and 24% 18% and 20% (2) Do not invest in the new facility. Invest in the new facility.