Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Insurance $220,000 Commissions to amusement houses $ 70,000 25,000 25,500 Maintenance 40,000 Net operating income 160,500 $ 59,500 Depreciation Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?