Sun Coast Tours is considering purchasing a new boat for use in its tour business....
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Accounting
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? O 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%? O Yes O No
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