Questionwater planet is considering purchasing a water park, Ask an Expert

Accounting

Question:

Water Planet is considering purchasing a water park in Atlanta, Georgia, for $1,870,000. The new facility will generate annual net cash inflows of $460,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of 10% on investments of this nature.

Requirements:

1. Compute the payback period, the ROR, the NPV, the IRR, and the profitability index of this investment.

2. Recommend whether the company should invest in this project.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91395121

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