Required information Exercise 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 $304,000, have a fifteen-year useful life, and have a total salvage value of $30,400. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 250,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income Exercise 14-8 Part 1 (Algo) $ 90,000 54,000 18,240 30,000 192,240 $ 57,760 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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Required information
Exercise 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 $304,000, have a fifteen-year useful life, and have a total salvage value of $30,400. The
company estimates that annual revenues and expenses associated with the games would be as follows:
$ 250,000
Revenues
Less operating expenses:
Commissions to amusement houses
Insurance
Depreciation
Maintenance
Net operating income
Exercise 14-8 Part 1 (Algo)
$ 90,000
54,000
18,240
30,000
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 1A
192,240
$ 57,760
Complete this question by entering your answers in the tabs below.
Req 1B
‒‒‒
Transcribed Image Text:! Required information Exercise 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 $304,000, have a fifteen-year useful life, and have a total salvage value of $30,400. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 250,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income Exercise 14-8 Part 1 (Algo) $ 90,000 54,000 18,240 30,000 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 1A 192,240 $ 57,760 Complete this question by entering your answers in the tabs below. Req 1B ‒‒‒
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