Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $310,000,
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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. The company estimates that annual revenues and expenses associated with the games would be as follows: $280,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance $90,000 58,000 18,600 70,000 236,600 43,406e Net operating income Exercise 13-8 Part 2 2a. Compute the simple rate of return promised by the games 2b. If the company requires a simple rate of return of at least 13%, will the games be purchased? Complete this question by entering your answers in the tabs below Req 2A Req 2B Compute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.) Simple rate of return K Req 2A Req 2B
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started