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Water Planet is considering purchasing a water park in Charleston comma South CarolinaCharleston, South Carolina,...

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Accounting

Water Planet is considering purchasing a water park in Charleston comma South CarolinaCharleston, South Carolina, for $2,200,000. The new facility will generate annual net cash inflows of $520,000 for ten years. Engineers estimate that the facility will remain useful for ten years and have no residual value. The company uses straightline depreciation. Its owners watn payback in less than five years and an ARR of 12% or more. Management uses 10% hurdle rate on investments of this nature.

Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment.

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