Solution 1:
Accounting rate of Return | ||||
Choose Numerator | / | Choose Denominator | = | Accounting Rate of Return |
Annual Net Income | / | Average Investment | = | Accounting Rate of Return |
$38,088 | / | $4,14,000 | = | 9.2% |
Solution 2:
Computation of Annual net Cash Flows | |
Annual Net Income | $38,088 |
Annual Depreciation [($414,000-$46,000)/8] | $46,000 |
Annual Cash Flows | $84,088 |
Payback Period | ||||
Choose Numerator | / | Choose Denominator | = | Payback Period |
Cost of investment | / | Annual net Cash flow | = | Payback Period |
$4,14,000 | / | $84,088 | = | 4.92 |
Years |
Solution 3:
Computation of NPV - Balloons By Sunset | |
Particulars | Amount |
Table or calculator function: | Present Value of $1 |
Cash Outflows (Beginning of year) | -$4,14,000 |
n= | 0 |
i= | 10% |
Present Value | -$4,14,000 |
Table or calculator function: | Present Value of annuityof $1 |
Cash Inflow (for next 8 years) | $84,088 |
n= | 8 |
i= | 10% |
Table Factor | 5.33493 |
Present Value | $4,48,604 |
Table or calculator function: | Present Value of $1 |
Cash Inflow (for 8th year) | $46,000 |
n= | 8 |
i= | 10% |
Table Factor | 0.46651 |
Present Value | $21,459 |
Total Net present value | $56,063 |
Solution 4:
Computation of NPV - Balloons By Sunset | |
Particulars | Amount |
Table or calculator function: | Present Value of $1 |
Cash Outflows (Beginning of year) | -$4,14,000 |
n= | 0 |
i= | 13% |
Present Value | -$4,14,000 |
Table or calculator function: | Present Value of annuityof $1 |
Cash Inflow (for next 8 years) | $84,088 |
n= | 8 |
i= | 13% |
Table Factor | 4.79877 |
Present Value | $4,03,519 |
Table or calculator function: | Present Value of $1 |
Cash Inflow (for 8th year) | $46,000 |
n= | 8 |
i= | 13% |
Table Factor | 0.37616 |
Present Value | $17,303 |
Total Net present value | $6,822 |
Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that...
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: 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: Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital $...
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: Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital $427,000 7 years $ 56,000 32,452 12% Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return....
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: Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital S S 497.000 9 years 47.000 40,754 10% Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of...
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: $ 282,000 6 years Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital $ 48,000 21,714 11% Assume straight line depreciation method is used Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of...
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 Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital $ 377,000 7 years $ 41,000 28,275 11% Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of...
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: Initial investment (for two hot air balloons) $ 408,000 Useful life 8 years Salvage value $ 48,000 Annual net income generated 36,720 BBS’s cost of capital 8 % Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate...
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: Initial investment (for two hot air balloons) $ 455,000 Useful life 8 years Salvage value $ 55,000 Annual net income generated 40,040 BBS’s cost of capital 11 % Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. 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: A ntincome gre 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.) Accounting Rate of Retum 2. Payback period. (Round your answer to 2 decimal places.) Payback Period...
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.) (Use appropriate factor(s) from the tables provided.) Initial investment (for two hot air balloons) $ 400,000 Useful life 9 years Salvage value $ 49,000 Annual net income generated 33,200 BBS’s cost of...
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.) (Use appropriate factor(s) from the tables provided.) BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital $ 386,000 7 years $...