PA11-1 (Algo) Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] 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 Annuity 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 BBS's cost of capital $ 442,000 9 years $ 46,000 38,012 7% 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 10 percent. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) 8.201% 5.57 years 1. Accounting rate of return 2. Payback period 3. Net present value 4. Net present value assuming 10% cost of capital TABLE 11.2A Present Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 2 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573 3 0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.8885 0.8631 0.8548 0.8466 0.8227 0.7921 0.7629 0.7350 5 0.9057 0.8626 0.8319 0.8219 0.8121 0.7835 0.7473 0.7130 0.6806 6 0.8880 0.8375 0.8018 0.7903 0.7790 0.7462 0.7050 0.6663 0.6302 7 0.8706 0.8131 0.7728 0.7599 0.7473 0.7107 0.6651 0.6227 0.5835 8 0.8535 0.7894 0.7449 0.7307 0.7168 0.6768 0.6274 0.5820 0.5403 9 0.8368 0.7664 0.7180 0.7026 0.6876 0.6446 0.5919 0.5439 0.5002 10 0.8203 0.7441 0.6920 0.6756 0.6595 0.6139 0.5584 0.5083 0.4632 20 0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 0.2145 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000 2 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.6944 0.6400 3 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.5787 0.5120 4 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.4823 0.4096 5 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 0.3277 6 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621 7 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.2791 0.2097 8 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678 9 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.1938 0.1342 10 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.1615 0.1074 20 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0261 0.0115 TABLE 11.1A Future Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0 1.0000 1.0000 1.0000 10000 10000 10000 1.0000 1.0000 1.0000 1 1.0200 1.0300 1.0375 1.0400 1.0425 1.0500 1.0600 1.0700 1.0800 2 1.0404 1.0609 1.0764 1.0816 1.0868 1.1025 1.1236 1.1449 1.1664 3 1.0612 1.0927 1.1168 1.1249 1.1330 1.1576 1.1910 1.2250 1.2597 4 1.0824 1.1255 1.1587 1.1699 1.1811 1.2155 1.2625 1.3108 1.3605 5 1.1041 1.1593 1.2021 1.2167 1.2313 1.2763 1.3382 1.4026 1.4693 6 1.1262 1.1941 1.2472 1.2653 1.2837 1.3401 1.4185 1.5007 1.5869 7 1.1487 1.2299 1.2939 1.3159 1.3382 1.4071 1.5036 1.6058 1.7138 8 1.1717 1.2668 1.3425 1.3686 1.3951 1.4775 1.5938 1.7182 1.8509 9 1.1951 1.3048 1.3928 1.4233 1.4544 1.5513 1.6895 1.8385 1.9990 10 1.2190 1.3439 1.4450 1.4802 1.5162 1.6289 1.7906 1.9672 2.1589 20 1.4859 1.8061 2.0882 2.1911 2.2989 2.6533 3.2071 3.8697 4.6610 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0 1.0000 1.0000 1.0000 10000 10000 10000 1.0000 1.0000 1.0000 1 1.0900 1.1000 1.1100 1.1200 1.1300 1.1400 1.1500 1.2000 1.2500 2. 1.1881 1.2100 1.2321 1.2544 1.2769 1.2996 1.3225 1.4400 1.5625 3 1.2950 1.3310 1.3676 1.4049 1.4429 1.4815 1.5209 1.7280 1.9531 4 1.4116 1.4641 1.5181 1.5735 1.6305 1.6890 1.7490 2.0736 2.4414 5 1.5386 1.6105 1.6851 1.7623 1.8424 1.9254 2.0114 2.4883 3.0518 6 1.6771 1.7716 1.8704 1.9738 2.0820 2.1950 2.3131 2.9860 3.8147 7 1.8280 1.9487 2.0762 2.2107 2.3526 2.5023 2.6600 3.5832 4.7684 8 1.9926 2.1436 2.3045 2.4760 2.6584 2.8526 3.0590 4.2998 5.9605 9 2.1719 2.3579 2.5580 2.7731 3.0040 3.2519 3.5179 5.1598 7.4506 10 2.3674 2.5937 2.8394 3.1058 3.3946 3.7072 4.0456 6.1917 9.3132 20 5.6044 6.7275 8.0623 9.6463 11.5231 13.7435 16.3665 38.3376 86.7362