Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (Ignore income taxes.)

Purchase cost	$	205,000
Annual net cash inflows that will be provided by the boat	$	51,900
Life of the boat		10	years

Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.)

1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased?

multiple choice 1

Yes

No

2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $11,800 salvage value. (Round your answer to 1 decimal place.)

2-b. Will the boat be purchased if the company's required rate of return is 14%?

multiple choice 2

Yes

No

Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (lgnore income taxes.) Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? Yes No 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $11,800 salvage value. (Round your answer to 1 decimal place.) 2-b. Will the boat be purchased if the company's required rate of return is 14% ? Yes No