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 $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. 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 $260,000 $90,000 36,000 40,320 50,000 Depreciation Maintenance 216,320 $ 43,680 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 5%, will the games be purchased?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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[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 $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company
estimates that annual revenues and expenses associated with the games would be as follows:
Revenues
$260,000
ook
Less operating expenses:
Commissions to amusement houses
$90,000
36,000
40,320
50,000 216,320
Mint
Insurance
Depreciation
Maintenance
Print
erences
Net operating income
$ 43,680
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 5%, will the games be purchased?
Complete this question by entering your answers in the tabs below.
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Transcribed Image Text:Check my wO Required information of 2 [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 $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $260,000 ook Less operating expenses: Commissions to amusement houses $90,000 36,000 40,320 50,000 216,320 Mint Insurance Depreciation Maintenance Print erences Net operating income $ 43,680 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 5%, will the games be purchased? Complete this question by entering your answers in the tabs below. wwwww.w wwww < Prev 9 of 15 Next > 411 C3X GO B. SW CInd
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