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 slide on one portion of his property. Mr. Sharkey gathered the following information about the slide: a. Water slide equipment could be purchased and installed at a cost of $525,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. b. Mr. Sharkey would use straight-line depreciation on the slide equipment. c. 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 $127750 to an amusement park in a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. The admission price would be $5.00 per person (the same price the Fun Center has been charging for the old rides). e. Based on experience at other water slides, Mr. Sharkey estimates that annual incremental operating expenses for the slide would be: salaries, $95.000; insurance, $5,800; utilities, $14,600; and maintenance, $11.400. Required: 1. Prepare an income statement showing the expected net operating income each year from the water slide. 2-a. Compute the simple rate of return expected from the water slide. 2-b. Based on the above computation, would the water slide be constructed if Mr. Sharkey requires a simple rate of return of at least 13% on all investments? 3-a. Compute the payback period for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback period of five years or less, would the water slide be constructed? Complete this question by entering your answers in the tabs below. 1. Prepare an income statement showing the expected net operating from the water slide. 2-a. Compute the simple rate of return expected from the water slide 2-b. Based on the above computation, would the water slide be cons Sharkey requires a simple rate of return of at least 13% on all investm 3-a. Compute the payback period for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback period of five y the water slide be constructed? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Req 3A Reg 38 Prepare an income statement showing the expected net operating income each year from the water slide. Sharkey's Fun Center Income Statement Selling and administrative expenses Total selling and administrative expenses Req 2A > Required: 1. Prepare an income statement showing the expected net operating income from the water slide. 2-a. Compute the simple rate of return expected from the water slide. 2-b. Based on the above computation, would the water slide be constructed i Sharkey requires a simple rate of return of at least 13% on all investments? 3-a. Compute the payback period for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback period of five years or le the water slide be constructed? Complete this question by entering your answers in the tabs below. Rea Reg 1 Reg 2A Roq24 Reaze Req 2B REGIA ROG 33 Compute the simple rate of return expected from the water slide. Simple rate of return % 1. Prepare an income statement showing the expecteu ritu operu from the water slide. 2-a. Compute the simple rate of return expected from the water slide 2-b. Based on the above computation, would the water slide be cons Sharkey requires a simple rate of return of at least 13% on all investm 3-a. Compute the payback period for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback period of five y the water slide be constructed? Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Reg 2 Reg 3 Compute the payback period for the water slide. (Roy Reg 3A wer to 2 decimal places.) Payback period years (Reg 28 Reg 3B >
