River Wild is considering purchasing a water park in Oakland, California, for $1,950,000.The new facility will generate annual net cash inflows of $495,000 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 10% or more. Management uses a 14% hurdle rate on investments of this nature.

Requirements

1.Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment. (If you use the tables to compute the IRR, answer with the closest interest rate shown in the tables.)

2.Recommend whether the company should invest in this projec

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urchasing a water park in Oakland, California, for $1,950,000. The new facility will generate annual net cash inflows of $495,000 for eight years. Engineers estimate that the facility will remain useful for eight years and e company uses straight-line depreciation. Its owners want paybad ew the present value annuity table.) 5 (Click the icon to view Reference ew the future value annuity table.) (Click the icon to view Present Value of $1 Periods the payback period, the ARR, the NPV, and the approximate IRR Round the payback period to years. 6 7 8 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 9 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 .914 0.905 0.896 0.887 0.879 0.870 0.861 0.820 0.780 0.742 0.672 0 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.554 0.478 0.412 0.307 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.456 0.375 0.308 0.208 5% 6% 8% 10% 0.952 0.943 0.926 0.909 0.907 0.890 0.857 0.826 0.864 0.840 0.794 0.751 0.823 | 0.792 0.735 | 0.683 0.784 0.747 0.681 0.621 0.746 0.705 0.630 0.564 0.711 0.665 0.583 0.513 | 0.677 0.627 0.540 0.467 0.6450.592 0.500 0.424 0.614 0.558 0.463 0.386 0.585 0.527 0.429 0.350 0.557 0.497 0.397 0.319 0.530 0.469 0.368 0.290 0.505 0.442 0.340 0.263 0.481 0.417 0.315 0.239 0.377 0.3120.215 0.149 0.295 0.233 0.146 | 0.092 0.231 0.174 0.099 0.057 0.1420.097 0.046 0.022 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 | 0.205 | 0.183 0.104 0.059 0.033 0.011 14% 16% 18% 20% 0.877 0.862 0.847 0.833 0.769 0.743 0.7430.718 0.7180.694 0.675 0.641 0.609 | 0.579 0.592 0.552 0.516 0.482 0.519 0.476 0.437 0.402 | 0.456 | 0.410 0.370 0.335 0.400 0.354 0.314 0.279 0.351 0.305 0.266 0.233 0.308 0.263 0.225 0.194 | 0.270 0.227 0.191 0.162 0.237 0.195 0.162 | 0.135 0.208 0.168 0.137 0.112 0.182 0.145 0.116 0.093 0.160 0.125 0.099 0.078 0.140 0.108 0.084 0.065 0.073 0.051 0.037 0.026 0.038 0.024 0.0160.010 0.020 0.0120.007 0.004 0.005 0.003 0.001 0.001 0.673 0.610 0.552 0.453 Print Done edit fields and then click Check Answer. i Reference Future Value of Annuity of $1 Periods 1% 3% 1.000 2.030 3.091 4.184 5.309 6.468 7.662 8.892 10.159 11.464 4% 1.000 2.040 3.122 4.246 5.416 6.633 7.898 9.214 10.583 12.006 6% 1.000 2.060 3.184 4.375 5.637 1.000 2.010 3.030 4.060 5.101 6.152 7.214 8.286 9.369 10.462 11.567 12.683 13.809 14.947 16.097 22.019 28.243 2% 1.000 2.020 3.060 4.122 5.204 6.308 7.434 8.583 9.755 10.950 12.169 13.412 14.680 15.974 17.293 24.297 32.030 40.568 60.402 5% 1.000 2.050 3.153 4.310 5.526 6.802 8.142 9.549 11.027 12.578 12% 1.000 2.120 3.374 4.779 6.353 14% 1.000 2.140 3.440 4.921 6.610 10% 1.000 2.100 3.310 4.641 6.105 7.716 9.487 11.436 13.579 15.937 8% 1.000 2.080 3.246 4.506 5.867 7.336 8.923 10.637 12.488 14.487 16.645 18.977 21.495 24.215 27.152 45.762 73.106 113.283 259.057 8.115 10.089 12.300 14.776 17.549 16% 1.000 2.160 3.506 5.066 6.877 8.977 11.414 14.240 17.519 21.321 25.733 30.850 36.786 43.672 51.660 115.380 249.214 530.312 2,360.757 6.975 8.394 9.897 11.491 13.181 14.972 16.870 18.882 21.015 23.276 36.786 54.865 79.058 154.762 18% 1.000 2.180 3.572 5.215 7.154 9.442 12.142 15.327 19.086 23.521 28.755 34.931 42.219 50.818 60.965 146.628 342.603 790.948 4,163.213 12.808 14.192 15.618 17.086 18.599 26.870 36.459 47.575 75.401 20% 1.000 2.200 3.640 5.368 7.442 9.930 12.916 16.499 20.799 25.959 32.150 39.581 48.497 59.196 72.035 186.688 471.981 1,181.882 7,343.858 13.486 15.026 16.627 18.292 20.024 29.778 41.646 56.085 95.026 14.207 15.917 17.713 19.599 21.579 8.536 10.730 13.233 16.085 19.337 23.045 27.271 32.089 37.581 43.842 91.025 181.871 356.787 1,342.025 18.531 21.384 24.523 27.975 31.772 57.275 98.347 164.494 442.593 20.655 24.133 28.029 32.393 37.280 72.052 133.334 241.333 767.091 34.785 33.066 47.727 66.439 120.800 48.886 Print Done River Wild is considering purchasing a water park in Oakland, California, for $1,950,000. The new facility will generate annual net cash inflows of $495,000 for eight years. Engineers estimate that the facility will remain useful have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of 10% or more. Management uses a 14% hurdle rate on investments of this nature. (Click the icon to view the present i Reference 5(Click the icon to view the future val Read the requirements. Future Value of $1 Periods 2% 5% Requirement 1. Compute the payback pe one decimal place.) tables.) (Round the 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 1.020 1.040 1.061 1.082 1.104 10% 1.100 1.210 1.331 1.464 1.611 1.050 1.103 1.158 1.216 1.276 The payback period is 14% 1.140 1.300 1.482 1.689 1.925 years. 6% 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1.689 1.791 18% 1.180 1.392 1.643 1.939 2.288 SNOROWN 1% 1.010 1.020 1.030 1.041 1.051 1.062 1.072 1.083 1.094 1.105 1.116 1.127 1.138 1.149 1.161 16% 1.160 1.346 1.561 1.811 2.100 2.436 2.826 3.278 3.803 4.411 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.126 1.149 1.172 1.195 1.219 1.243 1.268 1.294 1.319 1.346 1.486 1.641 1.811 2.208 8% 1.080 1.166 1.260 1.360 1.469 1.587 1.714 1.851 1.999 2.159 2.332 2.518 2.720 2.937 3.172 4.661 6.848 10.063 21.725 1.194 1.230 1.267 1.305 1.344 1.384 1.426 1.469 1.513 1.558 1.806 2.094 2.427 3.262 12% 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.363 4.887 5.474 9.646 17.000 29.960 93.051 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.797 4.177 1.539 1.601 1.665 1.732 1.801 20% 1.200 1.440 1.728 2.074 2.488 2.986 3.583 4.300 5.160 6.192 7.430 8.916 10.699 12.839 15.407 38.338 95.396 237.376 1,469.772 1.710 1.796 1.886 1.980 2.079 2.653 3.386 4.322 7.040 2.195 2.502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 7.138 13.743 26.462 50.950 188.884 1.898 2.012 2.133 2.261 2.397 3.207 4.292 5.743 10.286 2.700 3.185 3.759 4.435 5.234 6.176 7.288 8.599 10.147 11.974 27.393 62.669 143.371 750.378 5.117 5.936 6.886 7.988 9.266 1.220 1.282 1.348 1.489 2.191 2.666 3.243 4.801 6.727 10.835 17.449 45.259 19.461 40.874 85.850 378.721 Print Done Enter any number in the edit fields and then click Check Answer A Reference Periods 2% 4% 1% 1.000 2.010 3.030 4.060 5.101 6.152 7.214 8.286 9.369 10.462 11.567 12.683 13.809 14.947 16.097 22.019 28.243 34.785 48.886 1.000 2.020 3.060 4.122 5.204 6.308 7.434 8.583 9.755 10.950 12.169 13.412 14.680 15.974 17.293 24.297 32.030 40.568 60.402 3% 1.000 2.030 3.091 4.184 5.309 6.468 7.662 8.892 10.159 11.464 12.808 14.192 15.618 17.086 18.599 26.870 36.459 47.575 75.401 1.000 2.040 3.122 4.246 5.416 6.633 7.898 9.214 10.583 12.006 Future Value of Annuity of $1 5% 6% 8% 10% 1.000 1.000 1.000 1.000 2.050 2.060 2.080 2.100 3.153 3.184 3.246 3.310 4.310 4.375 4.506 4.641 5.526 5.637 5.867 6.105 6.802 6.975 7.336 7.716 8.142 8.394 8.923 9.487 9.549 9.897 10.637 11.436 11.027 11.491 12.488 13.579 12.578 13.181 14.487 15.937 14.207 14.972 16.645 18.531 15.917 16.870 18.977 21.384 17.713 18.882 21.495 24.523 19.599 21.015 24.215 27.975 21.579 23.276 27.152 31.772 33.066 36.786 45.762 57.275 47.727 54.865 73.106 98.347 66.439 79.058 113.283 164.494 120.800 154.762 259.057 442.593 12% 1.000 2.120 3.374 4.779 6.353 8.115 10.089 12.300 14.776 17.549 20.655 24.133 28.029 32.393 37.280 72.052 133.334 241.333 767.091 14% 1.000 2.140 3.440 4.921 6.610 8.536 10.730 13.233 16.085 19.337 23.045 27.271 32.089 37.581 43.842 91.025 181.871 356.787 1,342.025 16% 18% 20% 1.000 1.000 1.000 2.160 2.180 2.200 3.506 3.572 3.640 5.066 5.215 5.368 6.877 7.154 7.442 8.977 9.442 9.930 11.414 12.142 12.916 14.240 15.327 16.499 17.519 19.086 20.799 21.321 23.521 25.959 25.733 28.755 32.150 30.850 34.931 39.581 36.786 42.219 48.497 43.672 50.818 59.196 51.660 60.965 72.035 115.380 146.628 186.688 249.214 342.603471.981 530.312790.948 1,181.882 2,360.757 4,163.213 7,343.858 13.486 15.026 16.627 18.292 20.024 29.778 41.646 56.085 95.026 Print Done