7 Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various Information about the proposed Investment follows: (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. eBook A Print n References Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. $ 545,000 1. Accounting rate of return 2. Payback period 3. Net present value 4. Net present value assuming 13% cost of capital $ 59,000 $ 45,780 9 years Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: Do not round Intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 4. Recalculate the NPV assuming BBS's cost of capital is 13 percent. Note: Do not round Intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 96 10% years
7 Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various Information about the proposed Investment follows: (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. eBook A Print n References Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. $ 545,000 1. Accounting rate of return 2. Payback period 3. Net present value 4. Net present value assuming 13% cost of capital $ 59,000 $ 45,780 9 years Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: Do not round Intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 4. Recalculate the NPV assuming BBS's cost of capital is 13 percent. Note: Do not round Intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar. 96 10% years
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 9PB: Joliet Company is considering two alternative investments. The company requires an 18% return from...
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