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 5%, will the games be purchased?

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%.)

17 Part 1 of 2 Required information Exercise 14-8 (Algo) Payback Perlod and Simple Rate of Return [LO14-1, LO14-6) [The following information applies to the questions displayed below.] 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 $720.000, have a fifteen-year useful life, and have a total salvage value of $72,000. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 25e,eee Revenues Less operating expenses: Commissions to amusement houses Insurance $ 80,00 40,000 43,200 Depreciation 40,000 Maintenance Net operating income 2e3, 2ee $ 46.820 Exercise 14-8 Part 1 (Algo) 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? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Compute the payback period associated with the new electronic games. Payback Period Years