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Water World is considering purchasing a water park in Atlanta, Georgia, for $1,900,000. The new facility will generate annual net cash inflows of $487,000 for
Water World is considering purchasing a water park in Atlanta, Georgia, for $1,900,000. The new facility will generate annual net cash inflows of $487,000 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. (Click the icon to view the Present Value of $1 table.) Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table. Read the requirements. 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 ARR % Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.) Net Cash Annuity PV Factor (110%, n=8) Present Value Years Inflow 1 - 8 Present value of annuity 0 Investment Net present value of the investment The IRR (internal rate of return) is between Finally, determine the formula and calculate the profitability index. (Round your answer to two decimal places, X.XX.) Present value of net cash inflows / Initial Investment Profitability index
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