Using payback, ARR, NPV, IRR, and profitability index to make

capital investment decisions

Splash Nation is considering purchasing a water park in Atlanta, Georgia, for

$1,910,000. The new facility will generate annual net cash inflows of $483,000 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 10% on investments of this nature.

Requirements

Compute the payback, the ARR, the NPV, the IRR, and the profitability index of

this investment.

invest in this project?