Sharkey's Fun Centre 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 has gathered the following information about the slide:

a$.$ Water slide equipment could be purchased and installed at a cost of $$330,000.$ 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 $$60,000$ to an amusement park in a nearby city.

d$.$ Mr$.$ Sharkey has 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 $$3\mathrm{.}60$ per person $($the same price that the Fun Centre 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, $$85,000$; insurance, $$4,200$; utilities, $$13,000$; and maintenance, $$9,800.$

Required:

Prepare an income statement showing the expected operating income each year from the water slide.

$2-$a$.$ Compute the simple rate of return expected from the water slide.