Required information Exercise 12-8 (Algo) Payback Period and Simple Rate of Return [LO12-1, LO12-6] [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: Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $ 250,000 $ 80,000 40,000 43,200 40,000 203,200 $ 46,800 Exercise 12-8 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. Req 1A Req 18 Compute the payback period associated with the new electronic games. Payback Period Years > Complete this question by entering your answers in the tabs below. Req 1A Req 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? No Yes < Req 1A Req 18 Exercise 12-8 Part 2 (Algo) 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? Complete this question by entering your answers in the tabs below. Req 2A Req 28 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%.) Simple rate of return % Complete this question by entering your answers in the tabs below. Req 2A Req 2B If the company requires a simple rate of return of at least 5%, will the games be purchased? Yes ONO < Req 2A Req 28