Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Information about the proposed investment follows: Initial investment (for two hot air balloons) $420,000 Useful life 10 years Salvage value $50,000 Annual net income generated $37,800 BBS's cost of capital 11% Assume straight-line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting Rate of Return (2 points) Conclusion: This project is (acceptable or unacceptable), since the calculated accounting rate of rate is _(higher or lower) than cost of capital of 11%. 2. Payback Period (2 points) Annual depreciation = (cost salvage value) / useful life = Annual net cash flow = net income + depreciation = Payback period = initial investment / annual net cash flow