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Required information Exercise 12-8 Payback Period and Simple Rate of Return (LO12-1, L012-6] (The following information applies to the questions displayed below.] Nick's Novelties, Inc.,
Required information Exercise 12-8 Payback Period and Simple Rate of Return (LO12-1, L012-6] (The following information applies to the questions displayed below.] Nick's Novelties, Inc., 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: $240,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $70,000 45,000 28,500 30,000 173,500 $ 66,500 Exercise 12-8 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 10%, will the games be purchased
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