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Accounting

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Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $320,000, have a fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows:
Revenues $ 230,000
Less operating expenses:
Commissions to amusement houses $ 80,000
Insurance 20,000
Depreciation 19,200
Maintenance 50,000169,200
Net operating income $ 60,800
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 14%, will the games be purchased?

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