Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Variousinformation about the proposed investment follows: (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present ValueAnnuity of $1) (Use appropriate factor(s) from the tables provided.)Initial investnent (for tvo hot air balloons)Useful lifeSalvage valueAnnual net income generatedBBS'a cost of capital$ 340,0006 yeara$ 48,00029,920124Assume straight line depreciation method is used.Required:Help BBS evaluate this project by calculating each of the following:1. Accounting rate of return. (Round your answer to 2 decimal places.)2. Payback period. (Round your answer to 2 decimal places.)3. Net present value (NPV). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Roundthe final answer to nearest whole dollar.)4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. (Do not round intermediate calculations. Negative amountshould be indicated by a minus sign. Round the final answer to nearest whole dollar.) Answer is not complete.Accounting rate of return8.602.Payback period4.35years3.Net present value4.Net present value assuming 15% cost of capital

Net Present Value It is difference of present value of cash inflows and cash outflow. When the NPV…

Answered: Accounting rate of return Payback…

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Accounting

Accounting rate of return Payback period Net present value 8.60 4.35 years Net present val

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...

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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.) (Use appropriate factor(s) from the tables provided.) Initial investment (for two hot air balloons) $ 423,000 Useful life 9 years Salvage value $ 54,000 Annual net income generated 32,571 BBS’s cost of capital 11 % Assume straight line depreciation method is used.Required:Help BBS evaluate this project by calculating each of the following:1. Accounting rate of return. (Round your answer to 2 decimal places.)2. Payback period. (Round your answer to 2 decimal places.)3. Net present value (NPV). (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…
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. Initial investment (for two hot air balloons) $ 410,000 Useful life 9 years Salvage value $ 50,000 Annual net income generated $ 32,800 BBS’s cost of capital 10 % Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: Accounting rate of return. Note: Round your answer to 2 decimal places. Payback period. Note: Round your answer to 2 decimal places. 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. Recalculate the NPV assuming BBS's…
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. Initial investment (for two hot air balloons) $ 410,000 Useful life 9 years Salvage value $ 50,000 Annual net income generated $ 32,800 BBS’s cost of capital 10 % Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: Accounting rate of return. Note: Round your answer to 2 decimal places. Payback period. Note: Round your answer to 2 decimal places. 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. Recalculate the NPV assuming BBS's…
Net Present Value and Competing Projects Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below. Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 2 280,000 120,000 3 240,000 320,000 4 160,000 400,000 5 120,000 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value. Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment. Puro equipment: $fill in the blank 1 Briggs equipment: $fill in the blank 2 2. A third option has…
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This is a question from a preexam our teacher gave us to study for this term's exam, its not an actual exam question...: A project requires an initial investment of $150,000, to be depreciated straight-line over 3 years to an expected salvage value of $0. In addition, working capital will increase during the life of the project and amount to 20% of next year’s revenues, with the investment in working capital to be made at the beginning of each year. The project will generate $150,000 additional annual revenues and $85,000 additional annual expenses. The tax rate is 25%. Cost of capital amount to 7,5%. Please calculate the Net Present Value of the project and show your calculations. Would you recommend the investment? Please explain your advice.
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The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $36,000 $24,000 Useful life 4 years 5 years Estimated residual value 0 0 Estimated total income over the useful life $5,760 $6,600 Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place. 3D Printer fill in the blan % Truck