[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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![mework
Saved
Hel
[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
$220,000
Less operating expenses:
Commissions to amusement houses
Insurance
$70,000
25,000
25,500
40,000
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?
Complete this question by entering your answers in the tabs below.
< Prev
5.
of 11.
Next >
a
o search](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F973c4f96-9776-4ea1-aa31-4c6f579f4cb5%2F8258ec75-44ec-4b11-8e55-e6dc8a32d994%2Fhioxg8g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:mework
Saved
Hel
[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
$220,000
Less operating expenses:
Commissions to amusement houses
Insurance
$70,000
25,000
25,500
40,000
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?
Complete this question by entering your answers in the tabs below.
< Prev
5.
of 11.
Next >
a
o search
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education