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Which investment alternative (if either) would you recommend that the company accept? EXERCISE 14-8 Payback Period and Simple Rate of Return L014-1, LO14-6 Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amuse sent houses. The games would cost a total of $300,000, have an eight-year useful life, and have a cal salvage value of $20.000. The company estimates that annual revenues and expenses associ- ated with the games would be as follows: Revenues Less operating expenses: $200,000 Commissions to amusement houses $100,000 Insurance 7.000 Depreciation 35,000 Maintenance 18.000 160.000 Net operating income $ 40.000 Required: 1. What is the payback period for the new electronic games? 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? 2. What is the simple rate of return promised by the games? If the company requires a simple rate of return of at least 12%, will the games be purchased? EXERCISE 14-9 Net Present Value Analysis and Simple Rate of Return L014-2. 014-6 Derrick Russon is a divisional manager for Holston Company. His annual pay raises are largely man which has been show20ach of the