Sharkey's Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside thebuilding. Paul Sharkey, the owner, would like to constructfollowing information about the slide:water slide on one portion of his property. Mr. Sharkey gathered thea. Water slide equipment could be purchased and installed at a cost of $345,000. According to the manufacturer, the slide would beusable 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 besold for $117,500 to an amusement park in a nearby city.d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. Theadmission price would be $3.80 per person (the same price the Fun Center 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 wouldbe: salaries, $83,000; insurance, $4,600; utilities, $13,400; and maintenance, $10,200.Prepare an income statement showing the expected net operating income each year from the water slide.Sharkey's Fun CenterIncome StatementSelling and administrative expenses:Total selling and administrative expensesCompute the simple rate of return expected from the water slide.Simple rate of returnBased on the above computation, would the water slide be constructed if Mr. Sharkey requires a simple rate of return of atleast 12% on all investments?OYesONOCompute the payback period for the water slide. (Round your answer to 2 decimal places.)Payback periodyearsIf Mr. Sharkey accepts any project with a payback period of five years or less, would the water slide be constructed?YesONo

Name: Sharkey's Fun Center contains a number of electronic games as well as
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Description: Sharkey's Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside thebuilding. Paul Sharkey, the owner, would like to constructfollowing information about the slide:water slide on one por

Simple Rate Return = Net operating income / Initial investment net of salvage value of old equipment…

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a. Water slide equipment could be purchased and installed at a cost of $345,000. Ac usable for 12 years after which it would have no salvage value. p. 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. The sold for $117,500 to an amusement park in a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide e admission price would be $3.80 per person (the same price the Fun Center has be e. Based on experience at other water slides, Mr. Sharkey estimates that annual incre be: salaries, $83,000; insurance, $4,600; utilities, $13,400; and maintenance, $10,2

a. Water slide equipment could be purchased and installed at a cost of $345,000. Ac usable for 12 years after which it would have no salvage value. p. 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. The sold for $117,500 to an amusement park in a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide e admission price would be $3.80 per person (the same price the Fun Center has be e. Based on experience at other water slides, Mr. Sharkey estimates that annual incre be: salaries, $83,000; insurance, $4,600; utilities, $13,400; and maintenance, $10,2

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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Sharkey’s Fun Center 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 gathered the following information about the slide: Water slide equipment could be purchased and installed at a cost of $345,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. Mr. Sharkey would use straight-line depreciation on the slide equipment. 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 $117,500 to an amusement park in a nearby city. Mr. Sharkey 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 $3.80 per person (the same price the Fun Center has been charging for the old rides). Based on…
Sharkey’s Fun Center contains a number of electronic games as well as a miniature golf courseand various rides located outside the building. Paul Sharkey, the owner, would like to construct awater slide on one portion of his property. Mr. Sharkey has gathered the following information aboutthe slide:a. Water slide equipment could be purchased and installed at a cost of $330,000. According to themanufacturer, 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 fullydepreciated, 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 thanhave been using the rides. The admission price would be $3.60 per person (the same price that the FunCenter has been charging for the old…
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