Check my wORequired informationof 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 gameswould cost a total of $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The companyestimates that annual revenues and expenses associated with the games would be as follows:Revenues$260,000ookLess operating expenses:Commissions to amusement houses$90,00036,00040,32050,000 216,320MintInsuranceDepreciationMaintenancePrinterencesNet operating income$ 43,6802a. 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< Prev9of 15Next >411C3XGOB.SWCInd

Simple rate of return = Annual Net operating income / Initial investment2a. Simple rate of return = $43,680/$672,000 = 6.50% ab. Game should be purchased because Simple rate of return is more than expected rate of return.

Business

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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 $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?

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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