P$26-35$B Using payback, ARR, NPV$,$ IRR, and profitability index to make capital investment decisions

Water City is considering purchasing a water park in Omaha, Nebraska, for $$1,920,000.$ The new facility will generate annual net cash inflows of $$472,000$ 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 $12\%$ on investments of this nature.

Requirements

Compute the payback, the ARR, the NPV$,$ the IRR, and the profitability index of this investment.

Recommend whether the company should invest in this project.