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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 $$380,000,$ have a fifteen$-$year useful life, and have a total salvage value of $$38,000.$ The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues $$300,000$

Less operating expenses:

Commissions to

amusement houses $$60,000$

Insurance $$65,000$

Depreciation $$22,800$

Maintenance $$80,000$

$$227,800$

Net operating income $$72,200$

Requed:

$1$a$.$ Compute the payback perlod assoclated with the new electronic games.

$1$b$.$ Assume that Nick's Noveltles, Incorporated, will not purchase new games unless they provide a payback perlod of five years or less. Would the company purchase the new games?

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