Required information [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering...
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Required information [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $350,000, have a fifteen-year useful life, and have a total salvage value of $35,000. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Insurance $ 220,000 Commissions to amusement houses $ 90,000 20,000 21,000 Maintenance 40,000 Net operating income 171,000 $ 49,000 Depreciation Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games? Required information [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $350,000, have a fifteen-year useful life, and have a total salvage value of $35,000. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Insurance $ 220,000 Commissions to amusement houses $ 90,000 20,000 21,000 Maintenance 40,000 Net operating income 171,000 $ 49,000 Depreciation Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
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