.Splash Nation is considering purchasing a water park in Atlanta, Georgia, $1,910,000. The new facility will generate annual net cash inflows of $483,000 for eight years. Engineers estimate that the new facilities 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.
Use: (Present Value of $1 Table), and (Present Value of Annuity $1 table)
Requirements 1. Compute the payback, the ARR, the NPV, theIRR, and the profitability index of this investment.
2. Recommend whether the company should invest in this project.
