Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $475,000, have a fifteen-year useful life, and have a total salvage value of $47,500. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues		$ 240,000
Less operating expenses:
Commissions to amusement houses	$ 70,000
Insurance	45,000
Depreciation	28,500
Maintenance	30,000	173,500
Net operating income		$ 66,500

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

2b. If the company requires a simple rate of return of at least 10%, will the games be purchased?