River Wild is considering purchasing a water park in , for . The new facility will generate annual net cash inflows of for years. Engineers estimate that the facility will remain useful for years and have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of % or more. Management uses a % hurdle rate on investments of this nature.
Based on your reading, complete the given tasks:
a. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment.
b. Recommend whether the company should invest in this project?
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River Wild is considering purchasing a water park in , for . The new facility will generate annual n...
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