Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6] [ The following information applies to the questions displayed below .] Nicks

Required information

Exercise 13-8 Payback Period and Simple Rate of Return [LO13-1, LO13-6]

[The following information applies to the questions displayed below.]

Nicks Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $680,000, have a fifteen-year useful life, and have a total salvage value of $68,000. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues $ 250,000
Less operating expenses:
Commissions to amusement houses $ 60,000
Insurance 35,000
Depreciation 40,800
Maintenance 70,000 205,800
Net operating income $ 44,200

Garrison 16e Rechecks 2017-05-22

Exercise 13-8 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing

Authors: Alan H. Millichamp

8th Edition

082645500X, 9780826455000

More Books

Students also viewed these Accounting questions

Question

Recognize and discuss the causes of culture shock

Answered: 1 week ago