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Part 1

Part 2

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. Water Nation is considering purchasing a water park in Atlanta, Georgia, for $1,910,000. The new facility will generate annual net cash inflows of $480,000 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 12% 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 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.) Payback years Next, determine the formula and calculate the accounting rate of return (ARR). (Round the percentage to the nearest tenth percent, X.X%.) ARR % Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.) Net Cash Present Annuity PV Factor (i=12%, n=8) Years Inflow Value 1-8 Present value of annuity 0 Investment Years Inflow (i=12%, n=8) Value 1 - 8 0 Present value of annuity 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.) Profitability index Requirement 2. Recommend whether the company should invest in this project. Recommendation: Water Nation invest in the project because the payback period is the operating life, the NPV is profitability index is one, and the ARR and IRR are the company's required rate of return. the Choose from any list or enter any number in the input fields an greater than he next question. less than 1. How much money does Sandra need now to fund her travels? 2. After speaking with a number of banks, Sandra learns she will only be able to invest her funds at 4%. How much does she need now to fund her travels? Sandra wants to take the next six years off work to travel around the world. She estimates her annual cash needs at $26,000 (if she needs more, she will work odd jobs). Sandra believes she can invest her savings at 12% until she depletes her funds. (Click the icon to view 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 Requirement 1. How much money does Sandra need now to fund her travels? (Round your answer to the nearest whole dollar.) With the 12% interest rate, Sandra needs $ Requirement 2. After speaking with a number of banks, Sandra learns she will only be able to invest her funds at 4%. How much does she need now to fund her travels? (Round your answer to the nearest whole dollar.) With a 4% interest rate, Sandra would need $ If Sandra's savings are earning a lower interest rate (4%), she will need to save to be able to withdraw $26,000 per year. less more