Chapter 13 - Fun Time EntertainmentFun Time Entertainment is considering two projects that have the following estimated cash flows.Fun Time's cost of capital is 10%. Help the CFO determine whether the projects should be pursued.Option 1: A Water ParkA. 20000 0.666667 3.666666667 yearsrejectCash outlay - $75,000B. 33.6% acceptYear 1 cash flow - $10,000C.$ 86,135.91 choose water parkYear 2 cash flow - $20,000D.$ 38,448.43 choose skating rinkYear 3 cash flow - $25,000Year 4 cash flow - $30,000Year 5 cash flow - $35,000Sales price at end of year 5 - $120,000Option 2: A Skating RinkA. 02 yearsacceptCash outlay - $60,000B.47.9% accept - prefer this one thoughYear 1 cash flow - $30,000C.$ 69,246.64 choose water parkYear 2 cash flow - $30,000D.$ 41,774.69 choose skating rinkYear 3 cash flow - $30,000Year 4 cash flow - $30,000Sales price at end of year 4 - $50,000a) What is the payback period for each project?A13 0.666667 3.666667If Fun Time's required payback period was three years, would either project be accep A222A3Only Option 2 acceptedb) What is the IRR of each project?B134%If the cost of capital is 10%, would either project be accepted?B248%What if only one project could be accepted, which would you choose?B3Both would be acceptedB4We choose Option 2 with higher IRc) What is the NPV of each project at the 10% cost of capital?