Wing Walker Aces (WWA), Inc., is considering the purchase of a small plane to use in its wing- walking demonstrations and aerial tour business. Various information about the proposed investment follows:

Required:
Help WWA evaluate this project by calculating each of the following:

1. Accounting rate of return.

2. Payback period.

3. Net present value (NPV).

4. Recalculate WWA's NPV assuming the cost of capital is 6 percent.

5. Based on your calculations of NPV, what would you estimate the project’s internal rate of return to be?

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Initial investment Useful life $110,000 10 years Salvage value $ 10,000 Annual net income generated $ 5,400 WWA's cost of capital 10%