$100,000 Insurance........................................................... 7,000
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 $300,000, have an eight-year useful life, and have atotal salvage value of $20,000. The company estimates that annual revenues and expenses associated with the games would be as follows:
Revenues............................................................. $200,000
Less operating expenses:
Commissions to amusement houses................ $100,000
Insurance........................................................... 7,000
Maintenance...................................................... 18,000 160,000
Net operating income $ 40,000
2.1 Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
2.2 Compute the project's
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