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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) Nick's Novelties, Inc.,
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) 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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. The company estimates that annual revenues and expenses associated with the games would be as follows $280,000 Less operating expense Commissions to Insurance Depreciation Maintenance $90,000 58,000 18,600 0.000 236,600 Net operating income 43,400 Exercise 13-8 Part 2 2a. Compute the simple rate of return promised by the games Insurance Depreciation 58, 000 18,600 70,000 236,600 Net 43,400 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 13%, will the games be purchased? Complete this question by entering your answers in the tabs below. Req 2A Req 2B 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%.) Req 2B > Ingurance 58,000 18,600 intenance Net operating income 43,400 of 2 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 13%, will the games be purchased? nt Complete this question by entering your answers in the tabs below. Req 2A Req 2B r the company requires a simple rate of return of at least 13%, will the games be purchased? No C Req 2A
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