5 Required information [The following information applies to the questions displayed below.] Nick's Novelties, Inc.,...
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5 Required information [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 $310,000, have a fifteen-year useful life, and have a total salvage value of $31,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Part 1 of 2 Revenues $280,000 Less operating expenses $90,000 Commissions to amusement houses Insurance Depreciation Maintenance Print 58,000 18,600 70,000 236,600 Net operating income 43,400 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Inc., 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 1B Compute the payback period associated with the new electronic games Payback Period years Req 1A Req 1B > Req 1A Req 1B Assume that Nick's Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less Would the company purchase the new games? OYes ONo KReq 1A Req 1B
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