Sharkey$$s Fun Center is considering building a water slide for its customers and gathered the following information:

The water slide would cost $$585,000,$ have a $12-$year useful life with no salvage value and be depreciated using the straight$-$line method.

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 $$160,000$ to a nearby amusement park.

The water slide would attract $50,000$ more customers per year who each pay the company$$s usual admission price of $$5\mathrm{.}40$ per person.

The water slides$$ annual incremental operating expenses would be salaries, $$99,000$; insurance, $$6,200$; utilities, $$15,000$; and maintenance, $$11,800.$

Required:

$1.$ Prepare an income statement showing the water slides$$ expected annual net operating income.

$2-$a$.$ Compute the water slides$$ simple rate of return.

$2-$b$.$ Would the company purchase the water slide if it requires a simple rate of return of at least $14\%?$

$3-$a$.$ Compute the water slides$$ payback period.

$3-$b$.$ Would the company purchase the water slide if it requires a payback period of five years or less?