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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 $300,000,
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 fifteen-year useful life, and have a total salvage value of $45,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 200,000 Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance $60,000 40,000 17000 50,000 167,000 Net operating income $ 33,000 value: Required information 0.75 points Required 1a. Compute the pay back period associated with the new electronic games Payback Period Choose Numerator:Choose Denominator: Payback Period -Payback perioo years 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? No Yes
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