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

a$.$ The water slide would cost $$330,000,$ have a $12-$year useful life with no salvage value and be depreciated using the straight$-$

line method.

b$.$ 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 $$60,000$ to a nearby amusement park.

c$.$ The water slide would attract $50,000$ more customers per year who each pay the company's usual admission price of $$3\mathrm{.}60$

per person.

d$.$ The water slides' annual incremental operating expenses would be salaries, $$85,000$; insurance, $$4,200$; utilities, $$13,000$; and

maintenance, $$9,800.$

Required:

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?

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