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Nick's Novelties, Inc., is considering the purchase of electronic pinball machines to place in amusement houses. The machines would cost a total of $545,000, have
Nick's Novelties, Inc., is considering the purchase of electronic pinball machines to place in amusement houses. The machines would cost a total of $545,000, have an 17-year useful life, and have a total salvage value of $18,000. The company estimates that annual revenues and expenses associated with the machines would be as follows (Ignore income taxes): Revenues $258,000 Less operating expenses: Commissions to amusement houses $35,000 Insurance 85,000 Depreciation 31,000 Maintenance 34,000 185,000 Net operating income $73,000 -------------------------------------------------------------------------------- Requirement 1: (a) Compute the pay back period associated with the pinball machines. (Round your answer to 2 decimal places.) Payback period years=____ (b) Assume that Nick
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