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 $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance. Depreciation Maintenance Net operating income. Exercise 14-8 Part 1 (Algo) $ 90,000 36,000 40,320 50,000 $ 260,000 216,320 $ 43,680 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume 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? Complete this question by entering your answers in the tabs below.

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 $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance. Depreciation Maintenance Net operating income. Exercise 14-8 Part 1 (Algo) $ 90,000 36,000 40,320 50,000 $ 260,000 216,320 $ 43,680 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume 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? Complete this question by entering your answers in the tabs below.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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13,000 6. The Imperial Chemical Company is considering purchasing a chemical analysis machine worth $13,000. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a reduction of labour costs. In order to operate the machine properly, it must be calibrated each year. The machine has an expected life of 6 years, after which it will have no salvage value. The following table summarizes the annual savings in labour cost and the annual maintenance costs in calibration over 6 years: Year (n) Net Cash Flow ($) 0 Costs ($) Savings ($) -13,000 1 2,300 6,000 3,700 2 2,300 7,000 4,700 3 2,300 9,000 6,700 4 2,300 9,000 6,700 5 2,300 9,000 6,700 6 2,300 9,000 6,700 Find the internal rate of return for this project. [6]
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 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 $200, 000 Less operating expenses: Commissions to amusement houses $60,000 30,000 18,000 35,000 Insurance Depreciation Maintenance 143, 000 $ 57,000 Net operating income Required: 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. Would the company purchase the new games?
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* 00 The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $67000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8.000 per year to operate. The old machine currently in use could be sold now for a salvage value of $29,000. The new machine would have a useful life of 10 years with no salvage value. 1 What is the annual depreciation expense associated with the new bottling machine? 2 What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your enswer to 1 declmal place L.e. 0.123 should be considered as 12.3%.) Depreciation expense 2. Incremental net operating income Initial investment, 4. Simple rate of return < Prev 2 of 2…