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3 Sharkey's Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside the building Paul
3 Sharkey's Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside the building Paul Sharkey, the owner would like to construct a water side on one portion of his property. Mt. Sharkey gathered the following information about the slide a Water slide equipment could be purchased and installed at a cost of $570,000 According to the manufacture, the side would be usable for 12 years after which it would have no salvage value b. Mc Sharkey would use straight line depreciation on the slide equipment To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated but they could be sold for $136,000 to an amusement park in a nearby city. d. Me Sharkey concluded that about 50,000 more people would use the water side each year then have been using the rides. The admission price would be $5 30 per person (the same price the Fun Center has been charging for the old rides) Based on experience at other water slides, Mr. Sharkey estimates that annual incremental operating expenses for the slide would be salaries $98.000, Insurance. 56,100 vites, 514.900, and maintenance, 511700 Required: 1. Prepare an income statement showing the expected net operating income each year from the water slide 2- Compute the simple rate of return expected from the water slide 2. Based on the above computation, would the water slide be constructed if Mr. Sharley requires a simple rate of return of at least 16 on all investments 3-a compute the payback period for the water slide 3-6 M. Sharkey accepts any project with a payback period of five years or less, would the waterslide be constructed
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