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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 $175,000,

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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 $175,000, have a fifteen-year useful life, and have a total salvage value of $17,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $200,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $80,000 25,000 10,500 60,000 175,500 $ 24,500 Regulieu: 1a. Compute the payback period associated with the new electronic games. 1b. 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

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