[The following information applies to the questions displayed below.]

The Heritage Amusement Park would like to construct a new ride called the Sonic Boom, which the park management feels would be very popular. The ride would cost $325,000 to construct, and it would have a 10% salvage value at the end of its 15-year useful life. The company estimates that the following annual costs and revenues would be associated with the ride: (Ignore income taxes.)

Ticket revenues				$	220,000
Less operating expenses:
Maintenance	$	40,000
Salaries		60,000
Depreciation		19,500
Insurance		55,000
Total operating expenses					174,500
Net operating income				$	45,500
24. Required information Required: 1-a. Compute the pay back period associated with the new ride. Payback period years 1-b. Assume that the Heritage Amusement Park will not construct a new ride unless the ride provides a payback period of four years or less. Does the Sonic Boom ride satisfy this requirement? No Yes 25. Required information 2-a. Compute the simple rate of return promised by the new ride. (Round your answer to the nearest whole percent.) Simple rate of return % 2-b. If Heritage Amusement Park requires a simple rate of return of at least 15%, does the Sonic Boom ride meet this criterion? No Yes

24. 25. The Heritage Amusement Park would like to construct a new ride called the Sonic Boom, which the park management feels would be very popular. The ride would cost $325,000 to construct, and it would have a 10% salvage value at the end of its 15-year useful life. The company estimates that the following annual costs and revenues would be associated with the ride: (gnore income taxes.) $220,000 Ticket revenues Less operating expenses: $40,000 Maintenanc Salaries 60,000 19,500 Depreciation 55,000 nsurance Total operating expenses 174,500 45,500 Net operating income Required: 1-a. Compute the pay back period associated with the new ride. years Payback period 1-b. Assume that the Heritage Amusement Park will not construct a new ride unless the ride provides a payback period of four years or less. Does the Sonic Boom ride satisfy this requirement? O No Yes 2-a. Compute the simple rate of return promised by the newride. (Round your answer to the nearest whole percent) Simple rate of return 2-b. Heritage Amusement Park requires a simple rate of return of at least 15%, does the Sonic Boom ride meet this criterion? O No Yes