!Required informationExercise 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 $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. Thecompany estimates that annual revenues and expenses associated with the games would be as follows:$ 280,000RevenuesLess operating expenses:Commissions to amusement housesInsuranceDepreciationMaintenanceNet operating incomeExercise 14-8 Part 1 (Algo)$ 80,00057,00019,92060,000216,920$ 63,080Required:1a. Compute the payback period associated with the new electronic games.1b. Assume that Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years orless. Would the company purchase the new games?

The payback period is the length of time that the company will take to recover its investment amount…

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 $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 Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $ 80,000 57,000 19,920 60,000 $ 280,000 216,920 $ 63,080

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 $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 Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $ 80,000 57,000 19,920 60,000 $ 280,000 216,920 $ 63,080

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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