Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance. Depreciation Maintenance Net operating income. Exercise 14-8 Part 1 (Algo) $ 90,000 36,000 40,320 50,000 $ 260,000 216,320 $ 43,680 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume Nick's Novelties, Incorporated, 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.

Exercise 14-8 (Algo) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [The following information applies to the questions displayed below.] Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $672,000, have a fifteen-year useful life, and have a total salvage value of $67,200. The company estimates annual revenues and expenses associated with the games as follows: Revenues Less operating expenses: Commissions to amusement houses Insurance. Depreciation Maintenance Net operating income. Exercise 14-8 Part 1 (Algo) $ 90,000 36,000 40,320 50,000 $ 260,000 216,320 $ 43,680 Required: 1a. Compute the payback period associated with the new electronic games. 1b. Assume Nick's Novelties, Incorporated, 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

021 The Times newspaper is trying to decide between two machines. Machine A costs $80,000 and is expected to last 12 years, with a $14,000 salvage value. The annual maintenance and operating expenses are $4,000 per year. It will require major maintenance in year 5, which costs $2,000. Alternatively, Machine B costs $57,000. This machine will last for only 6 years because of its higher technology and delicate design, and its salvage value is assumed to be $15,000. The annual maintenance and operating are expected to be $8,000 per year. Based on a present worth comparison, which machine should be used using an 8-year study period at an interest rate of 8% per year. And why? Note, assuming the book value as a reasonable estimate for the market value, the book value of machine A in year 8 is $36,000, while the book value of Machine B in year 2 is $43,000.
9
None
None
vvk.2
Please dont provide solution image based thanx
None
2
13,000 6. The Imperial Chemical Company is considering purchasing a chemical analysis machine worth $13,000. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a reduction of labour costs. In order to operate the machine properly, it must be calibrated each year. The machine has an expected life of 6 years, after which it will have no salvage value. The following table summarizes the annual savings in labour cost and the annual maintenance costs in calibration over 6 years: Year (n) Net Cash Flow ($) 0 Costs ($) Savings ($) -13,000 1 2,300 6,000 3,700 2 2,300 7,000 4,700 3 2,300 9,000 6,700 4 2,300 9,000 6,700 5 2,300 9,000 6,700 6 2,300 9,000 6,700 Find the internal rate of return for this project. [6]
q9
11.2 The Wellington Construction Company is considering acquiring a new earthmover. The mover's basic price is $90,000, and it will cost another $18,000 to modify it for special use by the company. This earthmover falls into the MACRS five-year class. It will be sold after four years for $30,000. The purchase of the earthmover will have no effect on revenues, but it is expected to save the firm $35,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate (federal plus state) is 25%, and its MARR is 10%.
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 $300,000, have a 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: Revenues $200, 000 Less operating expenses: Commissions to amusement houses $60,000 30,000 18,000 35,000 Insurance Depreciation Maintenance 143, 000 $ 57,000 Net operating income 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?