River Wild is considering purchasing a water park in Oakland, California, for $2,200,000. The new facility will generate annual net cash inflows of $515,000 for ten years. Engineers estimate that the facility will remain useful for ten 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 12 % or more. Management uses a 10 % hurdle rate on investments of this nature.
Requirement 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.) (Round the payback period to one decimal place.)
The payback period is ______ years.
(Round the percentage to the nearest tenth percent.)
The ARR (accounting rate of return) is ______%.
(Round your answer to the nearest whole dollar.)
Net present value is ______
The IRR (internal rate of return) is between _______:
Reference Present Value of Annuity of $1 Periods 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 10.9900.980 0.9710.962 0.9520.9430.926 0.909 0.8930.877 0.8620.8470.833 2 1.970 1.942 1.913 1.8861.8591.833 1.7831.7361.6901.6471.6051.5661.528 3 2.9412.8842.829 2.775 2.723 2.6732.577 2.487 2.402 2.322 2.246 2.1742.106 43.902 3.808 3.7173.6303.5463.465 3.3123.170 3.037 2.914 2.7982.6902.589 5 4.853 4.713 4.580 4.452 4.3294.2123.9933.7913.605 3.4333.2743.127 2.991 6 5.7955.601 5.4175.2425.0764.917 4.623 4.355 4.111 3.8893.6853.4983.326 7 6.728 6.4726.2306.0025.7865.582 5.2064.8684.5644.2884.0393.8123.605 8 7.652 7.3257.0206.7336.463 6.2105.7475.3354.9684.6394.3444.0783.837 98.566 8.1627.7867.435 7.108 6.802 6.2475.7595.3284.9464.6074.3034.031 10 9.4718.9838.530 8.111 7.7227.3606.710 6.145 5.650 5.216 4.833 4.4944.192 1110.3689.7879.2538.7608.306 7.8877.1396.4955.9385.4535.0294.6564.327 12 11.255 10.575 9.9549.385 8.8638.384 7.536 6.814 6.1945.6605.197 4.7934.439 13 12.134 11.348 10.6359.9869.3948.8537.9047.103 6.4245.8425.3424.9104.533 14 13.004 12.106 11.296 10.5639.8999.2958.2447.3676.6286.002 5.4685.0084.611 15 13.865 12.849 11.938 11.118 10.3809.7128.5597.606 6.8116.1425.5755.0924.675 20 18.046 16.351 14.87713.59012.462 11.470 9.8188.514 7.4696.623 5.9295.3534.870 2522.023 19.523 17.41315.622 14.09412.783 10.675 9.0777.8436.873 6.0975.467 4.948 30 25.808 22.39619.600 17.29215.372 13.765 11.2589.4278.0557.003 6.1775.517 4.979 4032.835 |27.35523.115 19.79317.159 15.046 11.925 9.7798.2447.105 6.2335.548 4.997 Reference Present Value of $1 Periods 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 10.9900.9800.9710.9620.9520.943 0.926 0.9090.8930.877 0.862 0.847 0.833 2 0.9800.9610.943 0.925 0.9070.890 0.8570.826 0.7970.7690.7430.718 0.694 3 0.9710.9420.915 0.889 0.864 0.840 0.7940.751 0.712 0.6750.6410.6090.579 40.9610.9240.888 0.855 0.823 0.7920.735 0.6830.636 0.5920.552 0.516 0.482 50.951 0.906 0.863 0.822 0.7840.747 0.681 0.621 0.567 0.5190.4760.4370.402 6 0.9420.888 0.837 0.7900.7460.705 0.630 0.5640.507 0.4560.4100.370 0.335 70.933 0.871 0.813 0.760 0.711 0.665 0.5830.513 0.452 0.400 0.3540.3140.279 8 0.923 0.853 0.7890.731 0.677 0.627 0.540 0.467 0.4040.3510.305 0.266 0.233 9 0.9140.837 0.766 0.703 0.6450.592 0.500 0.424 0.3610.3080.263 0.225 0.194 10 0.905 0.8200.744 0.6760.6140.5580.4630.386 0.322 0.270 0.227 0.19 0.162 110.896 0.8040.722 0.650 0.585 0.527 0.4290.350 0.2870.2370.1950.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.4970.397 0.3190.2570.2080.168 0.137 0.112 13 0.879 0.773 0.681 0.6010.530 0.4690.368 0.290 0.2290.182 0.145 0.1160.093 14 0.870 0.7580.661 0.577 0.5050.442 0.340 0.2630.205 0.160 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.4810.417 0.315 0.239 0.183 0.140 0.1080.084 0.065 20 0.820 0.673 0.5540.456 0.377 0.3120.2150.1490.1040.0730.0510.0370.026 25 0.780 0.610 0.4780.375 0.2950.2330.146 0.0920.0590.0380.0240.0160.010 30 0.742 0.552 0.412 0.308 0.231 0.1740.0990.0570.033 0.0200.012 0.0070.004 400.672 0.4530.3070.2080.1420.0970.046 0.022 0.0110.0050.0030.0010.001 i Reference Future Value of Annuity of $1 Periods 1.000 1.000 2.030 7 0 6 3.091 5.309 9.48710.08910.730 11.414 12.1422.916 9.89710.637 11.436 12.300 13.23314.240 15.327 16.499 9.7550.159 10.583 11.027 11.49112.488 13.579 14.776 16.085 7.519 9.086 20.799 10.46210.950 11.464 12.006 12.57813.181 14.487 15.93717.549 19.337 21.321 23.52125.959 7.662 8.892 11.56712.16912.808 13.486 14.207 14.97216.645 18.531 20.65523.04525.733 28.755 32.150 12.68313.412 14.192 15.026 15.917 16.870 18.977 21.38424.133 27.271 30.850 34.93139.581 13.80914.680 15.618 16.627 17.71318.882 21.495 24.52328.029 32.08936.786 42.219 48.497 14.947 15.974 17.086 18.292 19.59921.015 24.215 27.97532.39337.581 43.67250.81859.196 16.09717.293 18.599 20.024 21.57923.276 27.152 31.77237.28043.842 51.660 60.965 72.035 22.01924.29726.870 29.77833.06636.786 45.762 57.275 72.052 91.025 115.380 146.628186.688 28.24332.030 36.459 41.646 47.72754.865 73.106 98.347133.334181.871 249.214 342.603471.981 34.785 40.56847.575 56.085 66.43979.058 113.283164.494 241.333356.787530.312 790.9481,181.882 48.88660.40275.401 95.026 120.800154.762 259.057442.593 767.091 1,342.025 |2,360.757 4,163.213 7,343.858 0%-200 400 rze ora 400 996 ses 300 160 197 400 996 999 800 007 SOB 996 ans 997 86 6 4 11122 23456 78 68974 39 '1 '8 479 7 02398 0595 5 01 72 5 67811 26 1-7 1402 831 7 284 19 2 00295 52327 68218 % 40 346 749 6 4163 7 12457 92471 48384 223 33445 9 00141 29484 38277 7599 075 114 9 741 2 of -89-012 2 23 46 2 91 82317 723 04128 9 2 2 6 %0 1 1 2 2 30456 7 02507 56930 91521 1631 075 693 2 69259 38 24791 4 96 6118 0012 1 9-0 0 12345 0500 1 2 3 4 5 6789 16% and 18% 22% and 24% 20% and 22% 18% and 20% Requirement 2. Recommend whether the company should invest in this project. Recommendation: Do not invest in the new facility. Invest in the new facility
