Splash Planet is considering purchasing a water park in Atlanta, Georgia, for $1,920,000. The new...
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Accounting
Splash Planet
is considering purchasing a water park in Atlanta, Georgia, for
$1,920,000.
The new facility will generate annual net cash inflows of $481,000 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.
Future Value of Ordinary Annuity of $1
Periods
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
12%
14%
15%
1
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
2
2.010
2.020
2.030
2.040
2.050
2.060
2.070
2.080
2.090
2.100
2.120
2.140
2.150
3
3.030
3.060
3.091
3.122
3.153
3.184
3.215
3.246
3.278
3.310
3.374
3.440
3.473
4
4.060
4.122
4.184
4.246
4.310
4.375
4.440
4.506
4.573
4.641
4.779
4.921
4.993
5
5.101
5.204
5.309
5.416
5.526
5.637
5.751
5.867
5.985
6.105
6.353
6.610
6.742
6
6.152
6.308
6.468
6.633
6.802
6.975
7.153
7.336
7.523
7.716
8.115
8.536
8.754
7
7.214
7.434
7.662
7.898
8.142
8.394
8.654
8.923
9.200
9.487
10.09
10.73
11.07
8
8.286
8.583
8.892
9.214
9.549
9.897
10.260
10.64
11.03
11.44
12.30
13.23
13.73
9
9.369
9.755
10.16
10.58
11.03
11.49
11.98
12.49
13.02
13.58
14.78
16.09
16.79
10
10.46
10.95
11.46
12.01
12.58
13.18
13.82
14.49
15.19
15.94
17.55
19.34
20.30
11
11.57
12.17
12.81
13.49
14.21
14.97
15.78
16.65
17.56
18.53
20.65
23.04
24.35
12
12.68
13.41
14.19
15.03
15.92
16.87
17.89
18.98
20.14
21.38
24.13
27.27
29.00
13
13.81
14.68
15.62
16.63
17.71
18.88
20.14
21.50
22.95
24.52
28.03
32.09
34.35
14
14.95
15.97
17.09
18.29
19.60
21.02
22.55
24.21
26.02
27.98
32.39
37.58
40.50
15
16.10
17.29
18.60
20.02
21.58
23.28
25.13
27.15
29.36
31.77
37.28
43.84
47.58
16
17.26
18.64
20.16
21.82
23.66
25.67
27.89
30.32
33.00
35.95
42.75
50.98
55.72
17
18.43
20.01
21.76
23.70
25.84
28.21
30.84
33.75
36.97
40.54
48.88
59.12
65.08
18
19.61
21.41
23.41
25.65
28.13
30.91
34.00
37.45
41.30
45.60
55.75
68.39
75.84
19
20.81
22.84
25.12
27.67
30.54
33.76
37.38
41.45
46.02
51.16
63.44
78.97
88.21
20
22.02
24.30
26.87
29.78
33.07
36.79
41.00
45.76
51.16
57.28
72.05
91.02
102.4
21
23.24
25.78
28.68
31.97
35.72
39.99
44.87
50.42
56.76
64.00
81.70
104.8
118.8
22
24.47
27.30
30.54
34.25
38.51
43.39
49.01
55.46
62.87
71.40
92.50
120.4
137.6
23
25.72
28.85
32.45
36.62
41.43
47.00
53.44
60.89
69.53
79.54
104.6
138.3
159.3
24
26.97
30.42
34.43
39.08
44.50
50.82
58.18
66.76
76.79
88.50
118.2
158.7
184.2
25
28.24
32.03
36.46
41.65
47.73
54.86
63.25
73.11
84.70
98.35
133.3
181.9
212.8
26
29.53
33.67
38.55
44.31
51.11
59.16
68.68
79.95
93.32
109.2
150.3
208.3
245.7
27
30.82
35.34
40.71
47.08
54.67
63.71
74.48
87.35
102.7
121.1
169.4
238.5
283.6
28
32.13
37.05
42.93
49.97
58.40
68.53
80.70
95.34
113.0
134.2
190.7
272.9
327.1
29
33.45
38.79
45.22
52.97
62.32
73.64
87.35
104.0
124.1
148.6
214.6
312.1
377.2
30
34.78
40.57
47.58
56.08
66.44
79.06
94.46
113.3
136.3
164.5
241.3
356.8
434.7
40
48.89
60.40
75.40
95.03
120.8
154.8
199.6
259.1
337.9
442.6
767.1
1,342
1,779
50
64.46
84.58
112.8
152.7
209.3
290.3
406.5
573.8
815.1
1,164
2,400
4,995
7,218
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
/
=
%
Answer & Explanation
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