Water Country is considering purchasing a water park in? Atlanta, Georgia, for $1,800,000.

The new facility will generate annual net cash inflows of $460,000 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.

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.

Safari File Edit View History Bookmarks Window Help 91% H, Sat 7:29 PM a E mathxl.com Student Login -One SPC MyAccountingLab CH 25 & 26 Homework - ACG2071 Managerial Accounting Mod Do Homework - Alexandra Baker ACG 2071 136 (515) Alexandra Baker 7/2/16 7:29 PM Homework: Homework CH26 Score: 6.15 of 20 pts P26-29A (similar to) Save 9 of 107 complete) HW Score: 54.17%, 54.17 of 100 pts Question Help Water Country is considering purchasing a water park in Atlanta, Georgia, for $1,800,000. The new facility will generate annual net cash inflows of $460,000 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.) Amount invested Expected annual net cash inflowPayback 1,800,000 460,000 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%.) Average annual operating income I 235,000 Average amount invested ARR 900,000 26.1 % Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.Xxx.) Annuity PV Factor (i=12%, n=8) Net Cash Present Years Inflow Value 1-8 Present value of annuity 0 Investment Enter any number in the edit fields and then click Check Answer Clear All Check Answer remaining 2