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 $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 220,000Less operating expenses: Commissions to amusement houses$ 70,000 Insurance25,000 Depreciation25,500 Maintenance40,000160,500Net operating income $ 59,500 Required: 1a. Compute the payback period (in years) associated with the new electronic games. 2a. Compute the simple rate of return promised by the games. (a percentage)
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 $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows:
Revenues $ 220,000Less operating expenses: Commissions to amusement houses$ 70,000 Insurance25,000 Depreciation25,500 Maintenance40,000160,500Net operating income $ 59,500
Required:
1a. Compute the payback period (in years) associated with the new electronic games.
2a. Compute the simple
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