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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. 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 Exercise 12-8 Part 1 (Algo) $ 90,000 58,000 18,600 70,000 $ 280,000 236,600 $ 43,400 Required: 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 years or less. Would the company purchase the new games?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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W
[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 $310,000, have a fifteen-year useful life, and have a
total salvage value of $31,000. 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
Exercise 12-8 Part 1 (Algo)
Complete this question by entering your answers in the tabs below.
Req 1A
$ 90,000
58,000
18,600
70,000
Required:
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 or less. Would the company purchase the new games?
Req 1B.
< Prev
S
2 3 of 6
$ 280,000
www
www
www
236,600
$ 43,400
Next >
Transcribed Image Text:ces W [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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. 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 Exercise 12-8 Part 1 (Algo) Complete this question by entering your answers in the tabs below. Req 1A $ 90,000 58,000 18,600 70,000 Required: 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 or less. Would the company purchase the new games? Req 1B. < Prev S 2 3 of 6 $ 280,000 www www www 236,600 $ 43,400 Next >
Exercise 12-8 Part 1 (Algo)
Required:
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 peri
years or less. Would the company purchase the new games?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Compute the payback period associated with the new electronic games.
Payback Period
Years
< Prev
< Req 1A
2
S
3
of 6
H
Req 1B >
Next >
Transcribed Image Text:Exercise 12-8 Part 1 (Algo) Required: 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 peri years or less. Would the company purchase the new games? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Compute the payback period associated with the new electronic games. Payback Period Years < Prev < Req 1A 2 S 3 of 6 H Req 1B > Next >
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