Nicks Novelties, Incorporated, 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 that annual revenues and expenses associated with the games would be as follows:

Revenues		$ 200,000
Less operating expenses:
Commissions to amusement houses	$ 100,000
Insurance	7,000
Depreciation	35,000
Maintenance	18,000	160,000
Net operating income		$ 40,000

2a. Compute the simple rate of return promised by the games.

2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?