Blue Water World is considering purchasing a new water park for $2,050,000. The facility is estimated to be useful for e

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Blue Water World Is Considering Purchasing A New Water Park For 2 050 000 The Facility Is Estimated To Be Useful For E 1 (72.7 KiB) Viewed 32 times

Blue Water World is considering purchasing a new water park for $2,050,000. The facility is estimated to be useful for eight years with no residual value. During its life it will generate $515,000 each year. The company's policies expect a payback period of less than 5 years, an ARR of 12% or more and uses a hurdle rate of 14%. The accounting department provided the following evaluation related to this opportunity: Payback period 3.98 years ARR 12.6% NPV $339,085 IRR between 18% and 20% Discuss what each of the measurements provided by the accountant means, including the limitations and strengths associated with each measurement. Provide your recommendation as to whether the new facility should be invested in and why