Required Information [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 $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. 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 $ 80,000 20,000 19,200 50,000 $ 230,000 169,200 $ 60,800 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?
Required Information [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 $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. 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 $ 80,000 20,000 19,200 50,000 $ 230,000 169,200 $ 60,800 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?
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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Required Information
[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 $320,000, have a fifteen-year useful life, and have
a total salvage value of $32,000. 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
Complete this question by entering your answers in the tabs below.
Req 1A
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
$ 80,000
28,888
19,200
50,000
Compute the payback period associated with the new electronic games.
Payback Period
Years
< Req 1A
$ 230,000
169,200
$ 60,800
Req 1B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b728f0c-f405-4f05-9754-0881c6de600a%2F45edb343-5282-48a7-9c57-b397189238d8%2Ffx70ccq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
Required Information
[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 $320,000, have a fifteen-year useful life, and have
a total salvage value of $32,000. 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
Complete this question by entering your answers in the tabs below.
Req 1A
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
$ 80,000
28,888
19,200
50,000
Compute the payback period associated with the new electronic games.
Payback Period
Years
< Req 1A
$ 230,000
169,200
$ 60,800
Req 1B >
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