A.11-2. [The following information applies to the questions displayed below.] Nicks 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 an eight-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 $ 240,000 Less operating expenses: Commissions to amusement houses $ 90,000 Insurance 30,000 Depreciation 33,750 Maintenance 60,000 213,750 Net operating income $ 26,250 2.value: 5.00 pointsRequired information Required: 1a. Compute the pay back period associated with the new electronic games. 1b. Assume that Nicks Novelties, Inc., will not purchase new games unless they provide a payback period of 6 years or less. Would the company purchase the new games? Yes No B. A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment $ 484,500 Annual cost savings that will be provided by the equipment $ 85,000 Life of the equipment 12 years Required: 1-a. Compute the payback period for the equipment. 1-b. If the company requires a payback period of four years or less, would the equipment be purchased? Yes No 2-a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipments useful life. 2-b. Would the equipment be purchased if the companys required rate of return is 14%? Yes No C. The management of Kunkel Company is considering the purchase of a $24,000 machine that would reduce operating costs by $6,000 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 13%. Use Excel or a financial calculator to solve. Required: 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Round answers to the nearest dollar.) 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.)