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 Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) Payback period Yes O No year(s) 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? $232,000 $ 55,000 Simple rate of return 14 years 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $13,600 salvage value. (Round your answer to 1 decimal place.) %
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 Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) Payback period Yes O No year(s) 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? $232,000 $ 55,000 Simple rate of return 14 years 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $13,600 salvage value. (Round your answer to 1 decimal place.) %
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
![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
Required:
1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.)
Payback period
Yes
O No
1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased?
year(s)
Simple rate of return
$232,000
$ 55,000
2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming
$13,600 salvage value. (Round your answer to 1 decimal place.)
Yes
%
2-b. Will the boat be purchased if the company's required rate of return is 14%?
14 years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda8d3701-22f8-4a45-a82b-994e94a3031f%2Ff3fcafe9-4145-48f5-bd3b-12e6d8137825%2F3kew2gs_processed.png&w=3840&q=75)
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
Required:
1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.)
Payback period
Yes
O No
1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased?
year(s)
Simple rate of return
$232,000
$ 55,000
2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming
$13,600 salvage value. (Round your answer to 1 decimal place.)
Yes
%
2-b. Will the boat be purchased if the company's required rate of return is 14%?
14 years
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