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Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $325,000, have a fifteen-year useful life, and have a total salvage value of $32,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income. $60,000 55,000 19,500 40,000 $220,000 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 15%, will the games be purchased? Req 28 174,500 $ 45,500 Complete this question by entering your answers in the tabs below. % Req 2A Compute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.) Simple rate of return Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $325,000, have a fifteen-year useful life, and have a total salvage value of $32,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income. $60,000 55,000 19,500 40,000 $220,000 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 15%, will the games be purchased? Req 28 174,500 $ 45,500 Complete this question by entering your answers in the tabs below. % Req 2A Compute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.) Simple rate of return
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Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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