Splash City is considering purchasing a water park in Atlanta, Georgia, for $1,900,000. The new facility will generate annual net cash inflows of $480,000 for eight years. Engineers estimate that the new facilities 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 the Present Value of Annuity of $1 table.) Requirements 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment. 2. Recommend whether the company should invest in this project. 1,900,000 480,000 4.0 years Next, determine the formula and calculate the accounting rate of return (ARR). (Round the percentage to the nearest tenth percent. X.X%.) Average annual operating income Average amount invested 950,000 ARR 242,500 25.5 % Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.) Net Cash Inflow $ 480,000 Annuity PV Factor (i-12%, n-8) 4.968 Present Value S 2,384,640 Years 1-8 Present value of annuity 1,900,000 S 484,640 Net present value of the investment