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Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues		$ 200,000
Less operating expenses:
Commissions to amusement houses	$ 60,000
Insurance	30,000
Depreciation	19,200
Maintenance	30,000	139,200
Net operating income		$ 60,800

2. Compute the simple rate of return promised by the games.

3. If the company requires a simple rate of return of at least 12%, will the games be purchased?