Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
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
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.) (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 $ 309,000 6 years $ 57,000 28,428 124 Assume straight line depreciation method is used, Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. (Round your answer to 2 decimal places.) 2. Payback period (Round your answer to 2 decimal places.) 3. Net present value (NPV). (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 15 percent. (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar) 4.39 years 1. Accounting rate of return 2. Payback period 13. Net present value 4 Net present value assuming 15% cost of capital
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/07/668360b2240ae_001668360b1bc239.jpg)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started