Question
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
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$120,000Useful life$10yearsSalvage value10,000Annual net income generated$3,000FCA's cost of capital8%
Assume straight line depreciation method is used.
rev: 04_20_2017_QC_CS-86552
Help FCA evaluate this project by calculating each of the following:
1.Accounting rate of return.(Round your answer to 2 decimal places.)
Accounting Rate of Return=
2.Payback period.(Round your answer to 2 decimal places.)
Payback Period=
3.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.Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)
Net Present Value=
4.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.)
Net Present Value=
5.Without doing any calculations, what is the project's IRR?
A.Greater than 8%
B.Between 3% and 8%
C.Less than 3%
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