Water City is considering purchasing a water park in Atlanta, Georgia, for $1,870,000. The new facility will generate annual net cash inflows of $475,000 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.
Water City is considering purchasing a water park in Atlanta, Georgia, for $1,870,000. The new facility will generate annual net cash inflows of $475,000 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 Requirement 1 Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment. First, determine the formula and calculate payback. (Round your answer to one decimal place, X-X) Expected annual net cash inflow Amount invested Payback 1,870,000 475,000 3.9 years Next, determine the formula and calculate the accounting rate of return (ARR). Round the percentage to the nearest tenth percent, X-X%.) Water City is considering purchasing a water park in Atlanta, Georgia, for $1,870,000. The new facility will generate annual net cash inflows of $475,000 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 Requirement 1 Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment. First, determine the formula and calculate payback. (Round your answer to one decimal place, X-X) Expected annual net cash inflow Amount invested Payback 1,870,000 475,000 3.9 years Next, determine the formula and calculate the accounting rate of return (ARR). Round the percentage to the nearest tenth percent, X-X%.)
