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[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
[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 $365,000, have an fifteen-year useful life, and have a total salvage value of $36,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 250,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $80,000 67,000 21,900 30,000 198,900 51,100 $ Required: 1a Compute the pay back period associated with the new electronic games. Payback Period Choose Denominator: Choose Numerator: = Payback Period Payback period years 2a. 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%.) Simple rate of return %
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