PA11-1 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: $ 507,000 9 years $ 48,000 40,560 9% Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the followinh: 1. Accounting rate of return. (Round your answer to 1 decimal place.) Accounting Rate of Return 2. Payback period. (Round your answer to 2 decimal places.) Payback Period Years 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. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) Net Present Value 4. Recalculate the NPV assuming BBS's cost of capital is 12 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. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) Net Present Value Future Value of $1 TABLE 11.1A 8% 7% 6% 5% 4.25% 3.75% 4% 3% 2% Periods 1.0000 1.0000 1.0000 1.0000 1.0425 1.0868 1.0000 1.0000 10375 10000 1.0300 1.0000 1.0000 0 1.0800 1.0700 1.0500 1.1025 1.0600 1.0400 1.0816 1.0200 1.1449 1.1664 1.1236 1.0764 1.0609 1.0404 2 1.2597 1.2250 1.1910 1.1576 1.1330 1.1249 1.0927 1.1168 1.0612 1.3605 1.4693 1.2625 1.3382 1.3108 1.2155 12763 1.1699 12167 1.1811 1.0824 1.1041 1.1587 1.1255 4. 1.4026 1.5007 1.6058 12313 12837 1.1593 1.2021 12472 5 1.5869 1.4185 1.3401 1.2653 1.1262 1.1941 6 1.7138 14071 1.4775 1.5513 1.5036 13382 1.3951 14544 1.3159 1.2299 1.2939 1.3425 1,3928 1.1487 7 1.7182 1.8509 15938 1.3686 1.1717 1 2668 1.3048 1.3439 8 1.8385 1.9672 1.9990 1.6895 1.4233 1/4802 1.1951 2.1589 1.7906 3.2071 1 4450 2.0882 1/5162 2.2989 1.6289 26533 1.2190 10 3.8697 4.6610 2.1911 1,4859 1.8061 20 14 % 25% 12 % 15% 20% 13% 10% 11% Periods 9% 1,0000 1.0000 12000 1.0000 1,0000 1.0000 1.0000 1/0000 /1.1300 12769 1.0000 0 1,0000 1.2500 1.5625 1.1500 1.1200 1.1400 1.1000 1.1100 1.0900 1 1.3225 12996 1.4400 12321 1,3676 12544 1.1881 1.2100 2 1/4429 1.6305 1.8424 2,0820 1.5209 1.7280 19531 1.4049 14815 1.3310 1.2950 2.4414 1,5735 1.7623 197 38 2.2107 2.4760 2.0736 2.4883 16890 1.7490 2.0114 2.3131 2.6600 3.0590 3.5179 4.0456 16.3665 1.5181 4 1.4116 1.4641 19254 3.0518 1.6851 1.5386 1.6105 5 21950 25023 2.8526 3.8147 1.8704 29860 3.5832 4.2998 5.1598 6.1917 1.6771 1.7716 1,9487 2.1436 2.3579 6 2.0762 4.7684 2.3526 2.6584 7 1.8280 1.9926 2.1719 2.3674 5.9605 2.3045 8 9 3,0040 2.7731 3.2519 7.4506 2.5580 3.7072 13,7435 2.8394 3.1058 3.3946 9.3132 10 2.5937 6.7275 9.646 11.5231 38.3376 86.7362 20 5.6044 8. Present Value of $1 TABLE 11.2A 8% 7% 5% 6% 4.25% 4% 3.75% 3% 2% Periods 0.9346 0.9259 0.9434 0.9524 0.9070 0.8638 0.8227 0.9639 0.9615 0,9592 0.9804 0.9612 0.9709 0.9426 09151 0.8885 1 0.8900 0.8396 0.7921 07473 0.8573 0.8734 0.9201 0.9290 0.9246 2 0.7938 0.8163 0.8826 0.8466 0.9423 0.9238 0.8954 0.8631 0.8890 0.7350 0.6806 0.7629 0.7130 0.8548 0,8219 07903 07599 07307 0.7835 0.8121 0.8319 0.9057 0.8626 0.8375 5 0.6302 0.7050 0.6663 0.6227 0.5820 0.5439 07790 0.7462 07107 0.6768 0.8018 07728 0.7449 0.8880 0.5835 0.5403 0.6651 0.6274 0,7473 0.8706 0.8131 7 07168 06876 0,6595 0.4350 07894 0.8535 8 0.5919 05584 0.3118 0.5002 0.6446 0.6139 0.3769 0.7180 0.8368 0.8203 0.6730 07026 0.7664 0.4632 0.5083 0.6920 06756 0.4564 0.7441 10 0.2145 0.2584 04789 0.5537 20 25% 14% 20% 10 % 12% 13% 15% 9% 11% Periods 0.8000 0.6400 0.5120 0.4096 0.3277 0.2621 0.2097 0.1678 0.1342 0.1074 0.0115 0.8696 0.8333 08929 07972 0.8850 07831 0.6931 06133 0.8772 0.9091 0.8264 0.7513 0.6830 0.6209 0.9009 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 1 0.7561 0.7695 06944 08116 0.7312 0.6587 0.5935 0.5346 2 0.6575 0.5718 0.4972 0.5787 0.6750 0.7118 0.5921 06355 0.5674 0.4823 4 0.5194 0.5428 04803 0.4251 03762 04019 5 04556 0.3349 0.2791 0.2326 0.4323 0.5066 0.5645 6 0.3759 0.3269 0.2843 0.2472 0.0611 0.5132 0.4665 0.4241 O4817 0.4339 0.3909 0.3522 0.1240 04523 0.4039 0.3996 7 0.3506 8 0,3329 0.3075 0,3606 0.1938 9 0.2697 0.3220 0.2946 0.1615 0.0261 0.3855 10 0.0868 0.1486 0.1037 0.0728 20 0.1784 Future Value of an Annuity of $1 TABLE 11.3A 8% 6% 7% 5% 2% 3.75% 4% 4.25% Periods 3% 1.0000 1.0000 1.0000 2.0600 3.1836 1.0000 1.0000 1.0000 1.0000 1.0000 20425 3.1293 1.0000 1 2.0700 3.2149 2.0800 2.0375 3.1139 4.2307 5.3893 2.0500 2 2.0200 2.0300 3.0909 4.1836 5.3091 2.0400 3.2464 4.5061 3.1525 4.3101 5.5256 3.0604 4.1216 5.2040 3.1216 4.2465 3 4.4399 5.7507 4.3746 4.2623 5.4434 4 5.8666 7.3359 5.6371 6.9753 5.4163 5 7.1533 8.6540 10.2598 6.3061 7.4343 8.5830 9.7546 6.6748 7.9585 6.8019 6 6.4684 6.5914 6.6330 8.1420 9.5491 8.3938 9.8975 11.4913 8.9228 10.6366 7.6625 8.8923 10.1591 7.8983 9.2142 10.5828 7 8 7.8386 9.1326 10.4750 9.2967 10.6918 11.0266 11.9780 12.4876 13.1808 13.8164 14.4866 45.7620 10.9497 11.4639 26.8704 11.8678 29.0174 12.0061 29.7781 12.1462 30.5625 12.5779 33.0660 10 40.9955 36.7856 20 24.2974 10 % Periods 12% 9% 11% 13% 14% 15% 20% 25% 1.0000 1.0000 1.0000 2.1100 1.0000 2.1200 1.0000 2.1300 1.0000 2.1400 1.0000 2.1500 1.0000 1.0000 1 2.0900 3.2781 2.1000 2.2000 3.6400 2.2500 3.8125 3.4396 4.9211 3.3100 3.3421 3.3744 3.4069 4.8498 3.4725 4.6410 6.1051 7.7156 4.7097 4.7793 6.3528 4.5731 4.9934 6.7424 5.3680 5.7656 6.4803 8.3227 10.4047 5 6 5.9847 7.5233 9.2004 6.2278 6.6101 8.5355 7.4416 9.9299 8.2070 7.9129 9.7833 8.1152 10.0890 8.7537 11.0668 13.7266 11.2588 15.0735 7 9.4872 10.7305 13.2328 12.9159 11.4359 11.0285 13.0210 11.8594 12.2997 12.7573 16.4991 20.7989 19.8419 14.7757 17.5487 72.0524 13.5975 14.1640 15.4157 18.4197 80.9468 16.0853 16.7856 25.8023 16.7220 64.2028 10 15.1929 51.1601 15.9374 19.3373 20.3037 25.9587 186.6880 33.2529 20 91.0249 57.2750 102.4436 342.9447 There is one payment each period. Present Value of Annuity of $1 BLE 11.4A 8% 7% 6% 5% 4.25% 4% 3.75% 3% Periods 2% 0.9259 1.7833 0.9434 1.8334 2.6730 0.9346 0.9524 0.9592 1.8794 2.7620 3.6086 0.9615 0.9709 0.9639 0.9804 1.9416 2.8839 3.8077 1 1.8080 1.8594 1.8861 18929 1.9135 2 2.5771 2.6243 3.3872 2.7232 2.7751 2.7883 2.8286 3.7171 4.5797 3.3121 3.9927 4.6229 3.4651 3.5460 3.6514 4.4833 3.6299 4.1002 4.2124 4.9173 4.3295 4.4207 4.4518 5.2421 47135 5 4.7665 5.0757 5.1997 5.4172 6.2303 7.0197 7.7861 5.2851 5.6014 6 5.2064 5.3893 5.9713 5.5824 5.9470 6.6638 7.3513 5.7864 6.0021 6.0579 6.8028 7.5208 6.4720 7.3255 8.1622 7 5.7466 6.2098 6.4632 6.7327 7.4353 8 6.2469 6.7101 6.5152 6.8017 7.1078 7.0236 7.3601 7.7217 8.0109 8.1109 13.5903 8.2128 8.5302 8.9826 10 20 9.8181 10.5940 11.4699 13.2944 12.4622 13.8962 16.3514 14.8775 25% 20% 15% 14% 13% 12% 10% 11% 9% Periods 0.8000 14400 1.9520 08333 1.5278 0,8550 0.8772 0.8696 0.8929 1.6901 2.4018 3.0373 0.9009 1.7125 2.4437 0.9174 17591 2.5313 3.2397 0.9091 1 1.6257 2.2832 1.6467 16681 17355 2 2.1065 2.5887 2.3612 2.9745 3.5172 2.3216 2.4869 3.1699 3 2.3616 2.9137 3.4331 28550 3.1024 3.6959 4 2.9906 3.3255 2.6893 3.3522 3.7845 4.1604 3.6048 3.8897 4.4859 5.0330 5.5348 3.7908 5 2.9514 3.1611 3.9975 4.4226 4.7988 3.8887 4.2883 4.6389 4.1114 4.2305 4.7122 5.1461 4.3553 6 3.6046 3.8372 4.5638 4.8684 3.3289 3.4631 3.5705 4.4873 4.9676 5.3349 5.7590 8 5.1317 5.4262 4.0310 4.9464 4.7716 5.3282 5.5370 9 5.9952 4.1925 4.8696 5.2161 5.0188 5.6502 7.4694 5.8892 10 20 6.4177 6.1446 3.9539 6.2593 7.0248 6.6231 7.9633 8.5136 9.1285 There is one payment each period