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

Annual net cash inflows that will be provided by the boat

Life of the boat

$$232,000$

$$55,000$

$14$ years

Required:

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

Payback period

year$($s$)$

$1-$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

$$13,600$ salvage value. $($Round your answer to $1$ decimal place.$)$

Simple rate of return

$\%$

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

Yes