Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (Ignore income taxes.) Purchase cost $ 250,000 Annual net cash inflows that will be provided by the boat $ 57,000 Life of the boat 10 years Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? multiple choice 1 Yes No 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $10,000 salvage value. (Round your answer to 1 decimal place.) 2-b. Will the boat be purchased if the company's required rate of return is 12%? multiple choice 2 Yes No
Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (Ignore income taxes.) Purchase cost $ 250,000 Annual net cash inflows that will be provided by the boat $ 57,000 Life of the boat 10 years Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? multiple choice 1 Yes No 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $10,000 salvage value. (Round your answer to 1 decimal place.) 2-b. Will the boat be purchased if the company's required rate of return is 12%? multiple choice 2 Yes No
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Sh3
Transcribed Image Text:Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the
boat is as follows: (Ignore income taxes.)
Purchase cost
Annual net cash inflows that will be provided by the boat $
Life of the boat
$ 250,000
57,000
10
Yes
No
years
Required:
1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.)
1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased?
multiple choice 1
2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life,
assuming $10,000 salvage value. (Round your answer to 1 decimal place.)
2-b. Will the boat be purchased if the company's required rate of return is 12%?
multiple choice 2
Yes
No
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education