Question
P12-57AEvaluate an investment using all four methods (Learning Objectives 2 & 4) Blue Water World is considering purchasing a water park in Columbus, Ohio, for
P12-57AEvaluate an investment using all four methods(Learning Objectives 2 & 4)
Blue Water World is considering purchasing a water park in Columbus, Ohio, for $2,050,000. The new facility will generate annual net cash inflows of $515,000 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 12% or more. Management uses a 14% hurdle rate on investments of this nature.
Requirements
1.Compute the NPV,
2.Recommend whether the company should invest in this project.
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