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Balloons By Sunset (BBS) is considering the purchase of two new hot air...

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Question

Accounting

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)
Salvage value $57,000
Annual net income generated $41,251
BBS's cost of capital
12%
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 cost of capital is 15 percent.
Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to
nearest whole dollar.
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