Required information Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6) [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 $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 220,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $ 70,000 25,000 25,500 40,000 160,500 $ 59,500 Exercise 14-8 Part 1 (Algo) Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that 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 Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6) [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 $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 220,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $ 70,000 25,000 25,500 40,000 160,500 $ 59,500 Exercise 14-8 Part 2 (Algo) 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