Rolling WaveRolling Wave is considering purchasing a water park in Charleston...
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Accounting
Rolling WaveRollingWave
is considering purchasing a water park in
Charleston comma South CarolinaCharleston,SouthCarolina,
for
$ 2 comma 200 comma 000$2,200,000.
The new facility will generate annual net cash inflows of
$ 515 comma 000$515,000
for
tenten
years. Engineers estimate that the facility will remain useful for
tenten
years and have no residual value. The company usesstraight-line depreciation. Its owners want payback in less than five years and an ARR of
1212%
or more. Management uses a
1010% hurdle rate on investments of this nature.
Requirement 1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment. (If you use the tables to compute the IRR, answer with the closest interest rate shown in the tables.) (Round the payback period to one decimal place.) The payback period is Dyears. (Round the percentage to the nearest tenth percent.) The ARR (accounting rate of return) is (Round your answer to the nearest whole dollar.) Net present value $ The IRR (internal rate of return) is between Requirement 2. Recommend whether the company should invest in this project. Recommendation
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