Kenneth McDaniel rents pontoon boats to customers. It has the opportunity to purchase an additional pontoon boat

Question:

Kenneth McDaniel rents pontoon boats to customers. It has the opportunity to purchase an additional pontoon boat for $40,000; it has an expected useful life of four years and no . Kenneth McDaniel uses straight-line depreciation. Expected rental revenue for the boat is $15,000 per year.
Required
a. Determine the payback period.
b. Determine the unadjusted rate of return based on the average cost of the investment.
c. Assume that the company's desired rate of return is 16 percent. Should Kenneth McDaniel purchase the additional boat?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...