meworkSavedHel[The following information applies to the questions displayed below.]Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusementhouses. The games would cost a total of $425,000, have a fifteen-year useful life, and have a total salvagevalue of $42,500. The company estimates that annual revenues and expenses associated with the gameswould be as follows:Revenues$220,000Less operating expenses:Commissions to amusement housesInsurance$70,00025,00025,50040,000DepreciationMaintenance160,500Net operating incomeS 59,5002a. Compute the simple rate of return promised by the games.2b. If the company requires a simple rate of return of at least 11%, will the games be purchased?Complete this question by entering your answers in the tabs below.< Prev5.of 11.Next >ao search

Simple rate of return means how much net income is earned on the made investments. Simple rate of…

[The following information applies to the questions displayed below.] Nick's Novelties, Inc., 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 S220,000 Less operating expenses: Commissions to amusement houses S70,000 25,000 25,500 40,000 Insurance Depreciation Maintenance 160,500 Net operating income S 59,500 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 11%, will the games be purchased?

[The following information applies to the questions displayed below.] Nick's Novelties, Inc., 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 S220,000 Less operating expenses: Commissions to amusement houses S70,000 25,000 25,500 40,000 Insurance Depreciation Maintenance 160,500 Net operating income S 59,500 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 11%, will the games be purchased?

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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[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 2 (Algo) Complete this question by entering your answers in the tabs below. Req 2A $ 90,000 58,000 18,600 70,000 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 13%, will the games be purchased? Req 2B
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Required information [The following information applies to the questions displayed below.] Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $300,000, have a fifteen-year useful life, and have a total salvage value of $30,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $200, 000 Less operating expenses: Commissions to amusement houses $60,000 30,000 18,000 35,000 Insurance Depreciation Maintenance 143, 000 $ 57,000 Net operating income Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?