Smith owns a 50’, 3 state room boat that cost him $700,000 when it was brand new. The boat is docked at a marina near Smith’s home and he has a part time maintenance man that checks the boat twice a week. Smith uses the boat on occasional weekends to take short trips with his friends and family. The boat is now five years old and requires some major mechanical and cosmetic work.
Smith is thinking about selling his boat and purchasing outright a 10% interest in a brand new 3 stateroom fractional yacht for $300,000. Smith likes the idea of owning a brand new yacht complete with warranties, competent management and a professional crew. He also resents being tied to the helm while his guests enjoy themselves on his boat. To compare the two options he creates the following table: