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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 $300,000, have an fifteen-year useful life, and have a total salvage value of $30,000. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 200,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $60,000 30,000 18,000 35.000 143,000 57,000 $ 2. value: 1.00 points Required information Required: 1a. Compute the pay back period associated with the new electronic games. Payback Period I 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 2b. If the company requires a simple rate of return of at least 11%, will the games be purchased? Yes O No
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