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The boat would not have to be in the water, for successful setup and confirmation that the sonar transducer is basically working with the display etc.
Before the sonar transducer is mounted on the boat, it may be placed in a bucket of water, while setup and confirmations are being done.
If the sonar transducer were in air, though, that might give very odd indications and probably is not a way to set up the Hook-7 etc.
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