2. Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its...

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2. 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues $ 270,000 Less operating expenses: Commissions to amusement houses $ 60,000 Insurance Depreciation Maintenance 52,000 23,520 Net operating income 60,000 195,520 $ 74,480 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? 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 11%, will the games be purchased? 2. 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues $ 270,000 Less operating expenses: Commissions to amusement houses $ 60,000 Insurance Depreciation Maintenance 52,000 23,520 Net operating income 60,000 195,520 $ 74,480 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? 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 11%, will the games be purchased?