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[The following information applies to the questions displayed below] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its
[The following information applies to the questions displayed below] 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 $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Insurance $ 200,000 Commissions to amusement houses $ 100,000 7,000 35,000 Maintenance 18,000 Net operating income 160,000 $ 40,000 Depreciation Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Compute the payback period associated with the new electronic games. Payback period Years Beg 18 >
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