uired information e following information applies to the questions displayed below.] k's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. games would cost a total of $325,000, have a fifteen-year useful life, and have a total salvage value of $32,500. The pany estimates that annual revenues and expenses associated with the games would be as follows: $ 220,000 evenues ess operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance et operating income $ 60,000 55,000 19,500 40,000 ute the simple rate of return promised by the games. company requires a simple rate of return of at least 15%, will the games be purchased? A 174,500 $ 45,500 ete this question by entering your answers in the tabs below. Req 2B

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Required information
[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 $325,000, have a fifteen-year useful life, and have a total salvage value of $32,500. The
company estimates that annual revenues and expenses associated with the games would be as follows:
Revenues
Less operating expenses:
Commissions to amusement houses.
Insurance
Depreciation
Maintenance
Net operating income
Req 2A
$ 60,000
55,000
Req 2B
19,500
40,000
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 15%, will the games be purchased?
$ 220,000
Complete this question by entering your answers in the tabs below.
< Req 2A
174,500
$ 45,500
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
Req 2B >
Transcribed Image Text:Required information [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 $325,000, have a fifteen-year useful life, and have a total salvage value of $32,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues Less operating expenses: Commissions to amusement houses. Insurance Depreciation Maintenance Net operating income Req 2A $ 60,000 55,000 Req 2B 19,500 40,000 2a. Compute the simple rate of return promised by the games. 2b. If the company requires a simple rate of return of at least 15%, will the games be purchased? $ 220,000 Complete this question by entering your answers in the tabs below. < Req 2A 174,500 $ 45,500 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 Req 2B >
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