Required informationExercise 14-8 (Static) Payback Period and Simple Rate of Return [LO14-1, LO14-6][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 an eight-year useful life, and have a total salvage value of $20,000. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$200,000Less operating expenses:$100,0007,00035,00018,000Commissions to amusement housesInsuranceDepreciationMaintenance160,000Net operating income$ 40,000Exercise 14-8 Part 2 (Static)2a. Compute the simple rate of return promised by the games.2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?

Simple rate of return = Net operating income * 100/ Cost of investment

Answered: Simple Rate of Return

Business

Accounting

Simple Rate of Return

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 11PROB

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Required information Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6] [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 games would cost a total of $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 280,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 57,000 Depreciation 19,920 Maintenance 60,000 216,920 Net operating income $ 63,080 Garrison 16e Rechecks 2017-05-22 Exercise 13-8 Part 2 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?
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Required information Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6] Skip to question [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 $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 230,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 20,000 Depreciation 19,200 Maintenance 50,000 169,200 Net operating income $ 60,800 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 14%, will the games be purchased?
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