Question

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: By 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 1 decimal place.) Answer is complete and correct Ang Ras 2. Payback period. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 461 Year 3. Net present value (NPV). (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. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) Answer is complete but not entirely correct. Net Presente s 31,723 4. Recalculate the NPV assuming BBS's cost of capital is 10 percent. (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. Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.) Answer is complete but not entirely correct.

Answer 1

The detailed working attached below.

Summary :

Accounting Rate of return : 8.5%

Payback period - 11.76 years

NPV @7% - ($131,409) negetive

NPV @10% - ($147,511) negetive

Thanks

Detailed answer is attached below

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