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Nicks Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $584,000, have an eight-year useful life, and have a total salvage value of $58,400. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues				$	250,000
Less operating expenses:
Commissions to amusement houses	$	80,000
Insurance		67,000
Depreciation		65,700
Maintenance		30,000			242,700
Net operating income				$	7,300

2.

value: 5.00 points

Required information

Required:
1a.	Compute the pay back period associated with the new electronic games.

1b.

Assume that Nicks Novelties, Inc., will not purchase new games unless they provide a payback period of 4 years or less. Would the company purchase the new games?

	No
	Yes