Determining net cash flows for a new boat Jan and Deana have been dreaming about owning a boat for some time and have decided that estimating its cash flows will help them in their decision process. They expect to have a disposable annual income of

$23,600. Their cash flow estimates for the boat purchase are as follows:

Negotiated price of the new boat

$69,600

Sales tax rate (applicable to purchase price)	6.2 %

Boat trade-in	$ 0

Estimated value of new boat in 4 years	$39,800

Estimated monthly repair and maintenance	$ 814

Estimated monthly docking fee	$504

Using these cash flow estimates, calculate the following:

a. The initial investment.

b. Operating cash flow.

c. Terminal cash flow.

d. Summary of annual cash flow. (Note: Assume that Jan and Deana plan on selling the boat in 4 years.)

e. On the basis on their disposable annual income, what advice would you give Jan and Deana regarding the proposed boat purchase?