Question Help Water World is considering purchasing a water park in Atlanta, Georgia, for $1,870,000. The new facility will generate annual net cash inflows of $460,000 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, and its stockholders demand an annual return of 12% on investments of this nature. (Click the icon to view the Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment. First, determine the formula and calculate payback. (Round your answer to one decimal place, X.X.) + Payback years Next, determine the formula and calculate the accounting rate of return (ARR). (Round the percentage to the nearest tenth percent, X.X%.) + ARR + II % Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.) Net Cash Present Annuity PV Factor (i=12%, n=8) Years Inflow Value 1-8 Present value of annuity 0 Investment Net present value of the investment The IRR (internal rate of return) is between Finally, determine the formula and calculate the profitability index. (Round your answer to two decimal places, X.XX.) = Profitability index = Requirement 2. Recommend whether the company should invest in this project. Recommendation: Water World invest in the project because the payback period is the operating life, the NPV is the profitability index is one, and the ARR and IRR are the company's required rate of return. Reference Present Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 2% 3% 4% 5% 0.990 0.9800.971 0.962 0.952 0.980 0.961 0.943 0.925 0.907 0.971 0.9420.915 0.889 0.864 0.961 0.924 0.888 0.855 0.823 0.951 0.906 0.863 0.822 0.784 6% 0.943 0.890 0.840 0.792 0.747 7% 0.935 0.873 0.816 0.763 0.713 8% 0.926 0.857 0.794 0.735 0.681 9% 10% 0.917 0.909 0.842 0.826 0.772 0.751 0.708 0.683 0.650 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 15% 16% 0.870 0.862 0.756 0.743 0.658 0.641 0.572 0.552 0.497 0.476 18% 20% 0.847 0.833 0.7180.694 0.609 0.579 0.516 0.482 0.437 0.402 Period 6 Period 7 Period 8 Period 9 Period 10 0.942 0.888 0.837 0.790 0.746 0.933 0.871 0.813 0.760 0.711 0.923 0.853 0.789 0.731 0.677 0.914 0.837 0.766 0.703 0.645 0.905 0.820 0.744 0.676 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.564 0.507 0.456 0.432 0.410 0.547 0.513 0.452 0.400 0.376 0.354 0.502 0.467 0.404 0.351 0.327 0.305 0.460 0.424 0.361 0.308 0.284 0.263 0.422 0.386 0.322 0.270 0.247 0.227 0.370 0.335 0.314 0.279 0.266 0.233 0.225 0.194 0.191 0.162 Period 11 0.896 0.8040.722 0.650 0.585 Period 12 0.887 0.788 0.701 0.625 0.557 Period 13 0.879 0.773 0.681 0.601 0.530 Period 14 0.870 0.758 0.661 0.577 0.505 Period 15 0.861 0.743 0.642 0.555 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.388 0.350 0.356 0.319 0.326 0.290 0.299 0.263 0.275 0.239 0.287 0.257 0.229 0.205 0.183 0.237 0.215 0.195 0.208 0.187 0.168 0.182 0.163 0.145 0.160 0.141 0.125 0.140 0.123 0.108 0.162 0.135 0.137 0.112 0.116 0.093 0.099 0.078 0.084 0.065 Period 16 Period 17 Period 18 Period 19 Period 20 0.853 0.7280.623 0.844 0.714 0.605 0.836 0.700 0.587 0.828 0.686 0.570 0.820 0.673 0.554 0.534 0.458 0.394 0.513 0.436 0.371 0.494 0.416 0.350 0.475 0.396 0.331 0.456 0.377 0.312 0.339 0.317 0.296 0.277 0.258 0.292 0.270 0.250 0.232 0.215 0.252 0.218 0.231 0.198 0.212 0.180 0.194 0.164 0.178 0.149 0.163 0.146 0.130 0.116 0.104 0.123 0.107 0.093 0.108 0.093 0.080 0.095 0.081 0.069 0.083 0.070 0.060 0.073 0.061 0.051 0.071 0.054 0.060 0.045 0.051 0.038 0.043 0.031 0.037 0.026 Period 21 0.811 0.660 0.538 0.439 0.359 Period 22 0.803 0.647 0.522 0.422 0.342 Period 23 0.795 0.634 0.507 0.4060.326 Period 24 0.788 0.622 0.492 0.390 0.310 Period 25 0.780 0.610 0.478 0.375 0.295 0.294 0.278 0.262 0.247 0.233 0.242 0.226 0.211 0.197 0.184 0.199 0.184 0.170 0.158 0.146 0.164 0.135 0.093 0.150 0.123 0.083 0.138 0.112 0.074 0.126 0.102 0.066 0.116 0.092 0.059 0.064 0.056 0.049 0.043 0.038 0.053 0.044 0.046 0.038 0.040 0.033 0.035 0.028 0.030 0.024 0.031 0.022 0.026 0.018 0.022 0.015 0.019 0.013 0.0160.010 Period 26 0.772 0.598 0.464 0.361 0.281 Period 27 0.764 0.586 0.450 0.347 0.268 Period 28 0.757 0.574 0.437 0.333 0.255 Period 29 0.749 0.563 0.424 0.321 0.243 Period 30 0.742 0.5520.412 0.308 0.231 0.220 0.207 0.196 0.185 0.174 0.172 0.161 0.150 0.141 0.131 0.135 0.125 0.116 0.107 0.099 0.106 0.084 0.098 0.076 0.090 0.069 0.082 0.063 0.075 0.057 0.053 0.047 0.042 0.037 0.033 0.033 0.026 0.021 0.029 0.023 0.018 0.026 0.0200.016 0.022 0.017 | 0.014 0.020 0.015 0.012 0.014 0.009 0.011 0.007 0.010 0.006 0.008 0.005 0.007 0.004 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.011 0.005 0.004 0.003 0.001 0.001 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.003 0.001 0.001 0.001 Print Done Reference X Future Value of $1 7% 8% Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 4% 5% 6% 9% 10% 1.030 1.040 1.050 1.060 1.070 1.080 1.090 1.100 1.061 1.082 1.103 | 1.1241.145 1.166 1.188 1.210 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.159 1.217 1.276 1.338 1.403 1.469 1.539 1.611 12% 14% 15% 1.120 1.140 1.150 1.254 1.300 1.323 1.405 1.482 1.521 1.574 1.689 1.749 1.762 1.925 2.011 Period 6 Period 7 Period 8 Period 9 Period 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.2301.316 1.407 1.504 1.606 1.714 | 1.828 1.949 1.267 1.369 1.477 | 1.594 1.718 1.851 1.993 2.144 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 1.974 2.1952.313 2.211 2.502 2.660 2.476 2.853 3.059 2.773 3.252 3.518 3.106 3.707 4.046 Period 11 Period 12 Period 13 Period 14 Period 15 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.384 1.539 1.710 1.898 2.105 | 2.332 2.580 2.853 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 1.558 1.801 2.079 2.397 2.759 3.172 3.642 4.177 3.479 4.226 4.652 3.896 4.818 5.350 4.363 5.492 6.153 4.887 6.261 7.076 5.474 7.138 8.137 Period 16 Period 17 Period 18 Period 19 Period 20 1.173 1.184 1.196 1.208 1.220 1.373 1.400 1.428 1.457 1.486 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.595 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.054 1.702 2.026 2.407 2.854 3.380 3.996 4.717 5.560 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 1.806 2.191 2.653 3.2073.870 4.661 5.604 6.727 6.130 8.137 | 9.358 6.866 9.276 10.76 7.690 10.58 12.38 8.613 12.06 14.23 9.646 13.74 16.37 Period 21 Period 22 Period 23 Period 24 Period 25 1.232 1.245 1.257 1.270 1.282 1.516 1.546 1.577 1.608 1.641 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 1.974 2.465 3.072 3.820 4.741 5.871 | 7.258 8.954 2.033 2.563 3.225 4.049 5.0726.341 | 7.911 9.850 2.094 2.666 3.386 4.292 5.427 6.848 8.623 10.83 10.80 15.67 18.82 12.10 17.86 21.64 13.55 20.36 24.89 15.18 23.21 | 28.63 17.00 26.46 32.92 Period 26 Period 27 Period 28 Period 29 Period 30 1.295 1.308 1.321 1.335 1.348 1.673 1.707 1.741 1.776 1.811 2.157 2.772 3.556 4.549 5.8077.396 9.399 11.92 2.2212.883 3.733 4.822 6.214 7.988 10.25 13.11 2.288 2.999 3.920 5.112 6.649 8.627 11.17 14.42 2.357 3.119 4.116 5.418 7.114 9.317 12.17 15.86 2.427 3.243 4.322 5.743 7.612 10.06 13.27 17.45 19.04 30.1737.86 21.32 34.39 43.54 23.88 39.20 50.07 26.75 44.69 57.58 29.96 50.95 66.21 Period 40 1.489 2.208 3.262 4.801 7.040 10.29 14.97 | 21.72 31.41 45.26 93.05 188.9 | 267.9 Period 50 1.645 2.692 4.384 7.107 11.47 18.42 29.46 46.90 74.36 117.4 289.0 700.21,084 Print Done Reference X Present Value of Ordinary Annuity of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 2% 0.990 0.980 1.970 1.942 2.941 2.884 3.902 3.808 4.853 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 5% 6% 7% 0.962 0.952 0.943 0.935 1.886 1.859 1.833 1.808 2.775 2.723 2.673 2.624 3.630 3.546 3.465 3.387 4.452 4.329 4.212 4.100 8% 9% 10% 0.926 0.917 0.909 1.783 | 1.759 1.736 2.577 2.531 2.487 3.312 3.240 3.170 3.993 3.890 3.791 12% 14% 15% 0.893 0.877 0.870 1.690 1.647 1.626 2.402 2.322 2.283 3.037 2.914 2.855 3.605 3.433 3.352 16% 0.862 1.605 2.246 2.798 3.274 18% 20% 0.847 0.833 1.566 1.528 2.174 2.106 2.690 2.589 3.127 2.991 Period 6 Period 7 Period 8 Period 9 Period 10 5.795 5.601 6.728 6.472 7.652 7.325 8.566 8.162 9.471 8.983 5.417 6.230 7.020 7.786 8.530 5.242 5.076 4.917 4.767 6.002 5.786 5.582 5.389 6.733 6.463 6.210 5.971 7.435 7.108 6.802 6.515 8.111 7.722 7.360 7.024 4.623 4.486 4.355 4.111 3.889 5.206 5.033 4.868 4.564 4.288 5.747 5.535 5.335 4.968 4.639 6.247 5.995 5.759 5.328 4.946 6.710 6.418 6.145 5.6505.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 Period 11 Period 12 Period 13 Period 14 Period 15 10.368 9.787 9.253 8.760 8.306 7.887 7.499 11.255 10.575 | 9.954 9.385 8.863 8.384 7.943 12.134 11.348 10.635 9.986 9.394 8.853 8.358 13.004 12.106 11.296 10.563 9.899 9.295 8.745 13.865 12.849 11.938 11.118 10.380 9.712 9.108 7.139 6.805 6.495 7.536 | 7.1616.814 7.904 7.487 7.103 8.244 | 7.786 7.367 8.559 8.061 7.606 5.938 6.194 6.424 6.628 6.811 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.656 4.793 4.910 5.008 5.092 4.327 4.439 4.533 4.611 4.675 Period 16 Period 17 Period 18 Period 19 Period 20 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 6.265 15.562 14.292 13.166 12.166 11.274 10.4771 9.763 9.122 8.544 8.022 7.120 6.373 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.250 6.467 17.226 | 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 18.046 | 16.351 14.877 13.590 12.462 11.470 10.594 | 9.818 9.129 8.514 7.4696.623 5.954 6.047 6.128 6.198 6.259 5.669 5.749 5.818 5.877 5.929 5.162 5.222 5.273 5.316 5.353 4.730 4.775 4.812 4.844 4.870 Period 21 Period 22 Period 23 Period 24 Period 25 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 7.562 6.687 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.2019.442 8.772 7.645 6.743 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.5808.883 7.718 6.792 21.24318.914 16.936 15.247 13.799 12.550 11.469 10.529 9.7078.985 7.784 6.835 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.8239.077 7.843 6.873 6.312 6.359 6.399 6.434 6.464 5.973 6.011 6.044 6.073 6.097 5.384 5.410 5.432 5.451 5.467 4.891 4.909 4.925 4.937 4.948 Period 26 Period 27 Period 28 Period 29 Period 30 22.795 20.12117.87715.983 14.375 13.003) 11.826 10.810 9.929 9.161 7.896 6.906 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027] 9.237 7.943 6.935 24.31621.28118.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 7.984 6.961 25.066 21.844 19.188 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.022 6.983 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.055 7.003 6.491 6.514 6.534 6.551 6.566 6.118 6.136 6.152 6.166 6.177 5.480 5.492 5.502 5.510 5.517 4.956 4.964 4.970 4.975 4.979 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.244 7.105 6.642 6.233 5.548 4.997 Period 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.962 9.915 8.304 7.133 6.661 6.246 5.554 4.999 Print Done X Reference eference 6% Periods Period 1 Period 2 Period 3 Period 4 Period 5 Future Value of Ordinary Annuity of $1 1% 2% 3% 4% 5% 7% 8% 9% 10% 12% 14% 15% 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 2.010 2.020 2.030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.0303.060 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 4.184 4.246 4.310 4.375 4.440 4.506 4.573 4.641 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6.353 6.610 6.742 Period 6 Period 7 Period 8 Period 9 Period 10 6.152 6.308 6.468 6.633 6.802 7.214 7.434 7.662 7.898 8.142 8.286 8.583 8.8929.214 9.549 9.369 9.755 10.16 10.58 11.03 10.46 10.95 11.46 12.01 12.58 6.975 | 7.153 7.336 7.523 7.716 8.394 8.654 8.923 9.200 9.487 9.897 10.260 10.64 11.03 11.44 11.49 11.98 12.49 13.02 13.58 13.18 13.82 14.49 15.19 15.94 8.115 8.536 8.754 10.09 10.73 11.07 12.30 13.23 13.73 14.78 16.09 16.79 17.55 | 19.34 20.30 Period 11 Period 12 Period 13 Period 14 Period 15 11.57 12.17 12.81 | 13.49 14.21 14.97 12.68 13.41 14.19 15.03 15.92 16.87 13.81 14.68 15.62 16.63 17.71 18.88 14.95 | 15.97 | 17.09 | 18.29 | 19.60 21.02 16.10 17.29 18.60 20.02 21.58 23.28 15.78 16.65 17.56 18.53 20.65 23.04 24.35 17.89 18.98 20.14 21.38 24.13 27.27 29.00 20.14 21.50 22.95 24.52 28.03 32.09 34.35 22.55 24.21 26.02 27.98 32.39 37.58 40.50 25.13 27.15 29.36 31.77 37.28 43.84 47.58 Period 16 Period 17 Period 18 Period 19 Period 20 17.26 18.64 20.16 21.82 23.66 25.67 18.43 20.01 21.76 23.70 25.84 28.21 19.61 21.41 23.41 25.65 28.13 30.91 20.81 22.84 25.12 27.67 30.54 33.76 22.02 24.30 26.87 29.78 33.07 36.79 27.89 30.32 33.00 35.95 42.75 50.98 55.72 30.84 33.75 36.97 40.54 48.88 59.12 65.08 34.00 37.45 41.30 45.60 55.75 68.39 75.84 37.38 41.45 46.02 51.16 63.44 78.97 88.21 41.00 45.76 51.16 57.28 72.05 91.02 102.4 Period 21 Period 22 Period 23 Period 24 Period 25 23.24 25.78 28.68 31.9735.72 39.99 24.47 27.30 30.54 34.25 38.51 43.39 25.72 28.85 32.45 36.62 41.43 47.00 26.97 30.42 34.43 39.08 44.50 50.82 28.24 32.03 36.46 41.65 47.73 54.86 44.87 50.42 56.76 64.00 81.70 104.8 118.8 49.01 55.46 62.87 71.40 | 92.50 120.4 137.6 53.44 60.89 69.53 79.54 104.6 138.3 159.3 58.18 66.76 76.79 | 88.50 118.2158.7 184.2 63.25 73.11 84.70 98.35 133.3 181.9212.8 Period 26 Period 27 Period 28 Period 29 Period 30 29.53 33.67 | 38.55 44.31 51.11 30.82 35.34 40.71 47.08 54.67 32.13 37.05 42.93 49.97 58.40 33.45 38.79 45.22 52.97 62.32 34.78 40.57 47.58 56.08 66.44 59.16 63.71 68.53 73.64 79.06 68.68 79.95 93.32 109.2 150.3 208.3 245.7 74.48 87.35 102.7 121.1 169.4 238.5 283.6 80.70 95.34 113.0 134.2 190.7 272.9 327.1 87.35 104.0 | 124.1 148.6 214.6 312.1 | 377.2 94.46 113.3 136.3 164.5 241.3356.8 434.7 Period 40 48.8960.4075.40 95.03 120.8 154.8 199.6 259.1 337.9 442.6 767.1 1,342 1,779 406.5 573.8 815.1 1,164 2,400 4,995 7,218 Period 50 64.46 84.58 112.8 152.7 209.3 290.3 Print Done