Ocean World is considering purchasing a water park in Oakland, California, for $1,950,000. The new facility will generate annual net cash inflows of $500,000 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 14% hurdle rate on investments of this nature. (Click the icon to view the present value table.) (Click the icon to view the present value annuity table.) (Click the icon to view the future value annuity table.) Read the requirements. (Click the icon to view the future value table.) 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 (in years) is (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 Requirement 2. Recommend whether the company should invest in this project. Recommendation: Reference Periods 1% 2% 3% 4% Present Value of Annuity of $1 5% 6% 8% 10% 12% 14% 16% 18% 20% Period 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 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 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 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 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 3.889 3.685 3.498 3.326 4.288 4.039 | 3.812 3.605 4.639 4.344 4.078 3.837 4.031 Period 2 Period 3 Period 4 Period 5 Period 6 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 Period 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 Period 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 Period 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 Period 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 Period 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 Period 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 Period 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 Period 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 Period 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 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 7.105 6.177 6.233 4.870 4.948 5.517 4.979 5.548 4.997 Print Done Reference Future Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% Period 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Period 2 2.010 2.020 2.030 2.040 2.050 2.060 2.080 |2.100 2.120 2.140 2.160 2.180 2.200 Period 3 3.030 3.060 3.091 3.122 3.153 3.184 3.246 3.310 3.374 3.440 3.506 3.572 3.640 Period 4 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 Period 5 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 Period 6 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 8.536 8.977 9.442 9.930 Period 7 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 | 12.300 || 13.233 14.240 15.327 16.499 9.369 9.755 10.159 10.583 | 11.027 | 11.491 10.462 10.950 11.464 12.006 12.578 13.181 12.488 13.579 | 14.776| 16.085 17.519 19.086 20.799 14.487 15.937 17.549 19.337 21.321 23.521 25.959 Period 15 11.567 12.169 12.808 13.486 14.207 14.972 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 14.947 15.974 17.086 18.292 19.599 21.015 24.215 27.975 32.393 16.097 17.293 18.599 20.024 21.579 23.276 27.152 31.772 37.280 16.645 18.531 20.655 23.045 25.733 28.755 32.150 27.271 30.850 34.931 39.581 32.089 36.786 42.219 48.497 37.581 43.672 50.818 59.196 43.842 51.660 60.965 72.035 Period 20 115.380 Period 25 Period 30 Period 40 146.628 | 186.688 249.214 342.603 | 471.981 22.019 24.297 26.870 29.778 33.066 36.786 45.762 57.275 72.052 91.025 28.243 32.030 36.459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 34.785 | 40.568 47.575 | 56.085 66.439 | 79.058 113.283| 164.494|241.333| 356.787 | 530.312 | 790.948 1,181.882 48.886 60.402 75.401 95.026 120.800 154.762 259.057 442.593 767.091 1,342.025 2,360.757 4,163.213 7,343.858 Reference Periods Period 1 1% 2% 3% Present Value of $1 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 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 Period 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 Period 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 Period 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 Period 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 Period 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 Period 7 0.933 0.871 0.813 0.760 Period 8 0.923 0.853 0.789 0.731 0.711 0.665 0.677 0.627 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.540 0.467 0.404 0.351 0.305 0.266 0.233 Period 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 Period 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 Period 11 0.896 0.804 0.722 Period 12 0.887 0.788 Period 13 0.879 0.773 0.701 0.681 Period 14 0.870 0.758 Period 15 0.861 0.743 0.661 0.650 0.585 0.527 0.429 0.350 0.287 0.625 0.557 0.497 0.397 0.319 0.257 0.601 0.530 0.469 0.368 0.290 0.229 0.577 0.505 0.442 0.340 0.263 0.205 0.642 0.555 0.481 0.417 0.315 0.239 0.183 Period 20 0.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.237 0.195 0.162 0.135 0.208 0.168 0.137 0.112 0.182 0.145 0.116 0.093 0.160 0.125 0.099 0.078 0.140 0.108 0.084 0.065 0.073 0.051 0.037 0.026 0.038 0.024 0.016 0.010 0.020 0.012 0.007 0.004 0.005 0.003 0.001 0.001 Print Done Reference Future Value of $1 Periods 1% 2% 3% 4% 5% 6% Period 1 1.010 1.020 1.030 1.040 1.050 Period 2 1.020 1.040 1.061 1.082 1.103 Period 3 1.030 1.061 1.093 1.125 1.158 Period 4 1.041 1.082 1.126 1.170 1.216 1.262 | 1.360 Period 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 8% 10% 12% 14% 16% 18% 1.060 1.080 1.100 1.120 1.140 1.160 1.180 1.200 1.124 1.166 1.210 1.254 1.300 1.346 1.392 1.440 1.191 1.260 1.331 1.405 1.482 1.561 1.643 1.728 1.464 1.574 1.689 1.811 1.939 2.074 1.611 1.762 1.925 20% 2.100 2.288 2.488 Period 6 1.062 1.126 1.194 1.265 1.340 | 1.419 1.587 1.772 1.974 2.195 2.436 2.700 2.986 Period 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 1.949 2.211 2.502 2.826 3.185 3.583 Period 8 1.083 1.172 1.267 1.369 1.477 1.594 1.851 2.144 2.476 2.853 3.278 3.759 4.300 Period 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 2.773 3.252 3.803 4.435 5.160 Period 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 3.106 3.707 4.411 5.234 6.192 Period 11 1.116 Period 12 1.127 1.243 1.268 1.426 1.384 1.539 1.710 1.898 2.332 2.853 3.479 4.226 5.117 6.176 7.430 1.601 1.796 2.012 2.518 3.138 3.896 4.818 5.936 7.288 8.916 Period 13 1.138 1.294 1.469 1.665 1.886 2.133 2.720 3.452 4.363 5.492 6.886 8.599 10.699 Period 14 1.149 1.319 1.513 Period 15 1.161 1.346 1.732 1.980 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12.839 1.558 1.801 2.079 2.397 3.172 4.177 5.474 7.138 9.266 11.974 15.407 Period 20 2.191 2.653 3.207 4.661 Period 25 Period 30 Period 40 1.220 1.486 1.806 1.282 1.641 2.094 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 1.348 1.811 2.427 3.243 4.322 5.743 10.063 17.449 29.960 50.950 85.850 143.371 237.376 1.489 2.208 3.262 4.801 7.040 10.286 21.725 45.259 93.051 188.884 378.721 750.378 1,469.772 6.727 9.646 13.743 19.461 27.393 38.338