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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. 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 Net operating income Exercise 12-8 Part 1 (Algo) $ 90,000 58,000 18,600 70,000 $ 280,000 236,600 $ 43,400 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 years or less. Would the company purchase the new games?
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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. 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 Net operating income Exercise 12-8 Part 1 (Algo) $ 90,000 58,000 18,600 70,000 $ 280,000 236,600 $ 43,400 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 years or less. Would the company purchase the new games?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 11P: REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old...
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