Business, 07.05.2021 01:00 sleimanabir
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) $510,000
Useful life 9 years Salvage value $51,000
Annual net income generated 40,290
BBSâs cost of capital 9%.
Assume straight line depreciation method is used.
Required:
Help BBS evaluate this project by calculating each of the following:
a. Accounting rate of return.
b. Payback period.
c. Net present value (NPV).
d. Recalculate the NPV assuming BBS's cost of capital is 15 percent.
Answers: 1
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Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expa...
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