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 $$300,000,$ have an eight$-$year useful life,

and have a total salvage value of $$20,000.$ The company estimates annual revenues and

expenses associated with the games as follows:

Required:

What is the payback period for the new electronic games? Assume 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?

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$?$

Computation of the annual cash inflow associated with the new electronic games:

Net operating income.....$

Add noncash deduction for depreciation $.......$$

Annual net cash inflow..... $

The payback computation would be: