Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6]

Skip to question

[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 $432,000, have a fifteen-year useful life, and have a total salvage value of $43,200. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues				$	230,000
Less operating expenses:
Commissions to amusement houses	$	70,000
Insurance		56,000
Depreciation		25,920
Maintenance		50,000			201,920
Net operating income				$	28,080

Garrison 16e Rechecks 2017-05-22

Exercise 13-8 Part 1

Required:

1a. Compute the payback period associated with the new electronic games.

Req 1A Req 1B Compute the payback period associated with the new electronic games. Payback period Years