Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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 Annulty 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 Bes's cost of capital $ 463,000 8 years $ 47,000 42,133 9% Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return (Round your answer to 2 decimal places.) 2. Payback period. (Round your answer to 2 decimal places.) 3. Net present value (NPV) (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) 4. Recalculate the NPV assuming BBS's cost of capital is 12 percent. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) % 1 Accounting rate of return 2 Payback period 3 Net present value 4. Net present value assuming 12% cost of capital years 81 620 $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical Auditing

Authors: Ernest Evan Spicer, Ernest Charles Pegler

17th Edition

0406678014, 9780406678010

More Books

Students also viewed these Accounting questions

Question

What attracts you about this role?

Answered: 1 week ago

Question

How many states in India?

Answered: 1 week ago

Question

HOW IS MARKETING CHANGING WITH ARTIFITIAL INTELIGENCE

Answered: 1 week ago