Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PLEASE SOLVE # 4 . Balloons By Sunset ( BBS ) is considering the purchase of two new hot air balloons so that it can

PLEASE SOLVE #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.)
Note: 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
8 years
$58,000
$37,570
10%
Assume straight line depreciation method is used.
Required:
Help BBS evaluate this project by calculating each of the following:
Accounting rate of return.
Note: Round your answer to 2 decimal places.
2. Payback period.
Note: Round your answer to 2 decimal places.
3. Net present value (NPV).
Note: 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 13 percent.
Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.
Answer is complete but not entirely correct.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting A Practical Approach Chapters 1-25

Authors: Jeffrey Slater

12th Edition

013277206X, 978-0132772068

More Books

Students also viewed these Accounting questions

Question

How does that affect your approach to complaint handling?

Answered: 1 week ago