Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The gameswould cost a total of $300,000, have a fifteen-year useful life, and have a total salvage value of $30,000. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$200,000Less operating expenses:Commissions to amusement houses$60,00030,00018, 00035,000InsuranceDepreciationMaintenance143,000Net operating income$ 57,0002a. 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?Complete this question by entering your answers in the tabs below.Req 2AReq 2BCompute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should beconsidered as 12.3%.)Simple rate of return% Required information[The following information applies to the questions displayed below.]Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The gameswould cost a total of $300,000, have a fifteen-year useful life, and have a total salvage value of $30,000. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$200, 000Less operating expenses:Commissions to amusement houses$60,00030,00018,00035,000InsuranceDepreciationMaintenance143, 000$ 57,000Net operating incomeRequired:1a. Compute the payback period associated with the new electronic games.1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Wouldthe company purchase the new games?

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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 $300,000, have a fifteen-year useful life, and have a total salvage value of $30,000. 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 $200,000 $60,000 30, 000 18,000 35,000 143, 000 $ 57,000 Net operating income 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? Complete this question by entering your answers in the tabs below. Req 2A Reg 2B 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 $300,000, have a fifteen-year useful life, and have a total salvage value of $30,000. 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 $200,000 $60,000 30, 000 18,000 35,000 143, 000 $ 57,000 Net operating income 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? Complete this question by entering your answers in the tabs below. Req 2A Reg 2B 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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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