Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues		$ 260,000
Less operating expenses:
Commissions to amusement houses	$ 90,000
Insurance	36,000
Depreciation	40,320
Maintenance	50,000	216,320
Net operating income		$ 43,680

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

2b. If the company requires a simple rate of return of at least 5%, will the games be purchased?