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	$	310,000
Useful life	$	10	years
Salvage value		25,000
Annual net income generated	$	6,800
FCA's cost of capital		7	%

Assume straight line depreciation method is used.

Required: Help FCA evaluate this project by calculating each of the following: 1. Accounting rate of return.

3. Help FCA evaluate this project by calculating each of the following: Net present value (NPV).

4. Help FCA evaluate this project by calculating each of the following: Recalculate FCA's NPV assuming the cost of capital is 3 percent.