Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its...
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Accounting
Nicks Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $ have a fifteenyear useful life, and have a total salvage value of $ 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 $
Required:
a Compute the payback period associated with the new electronic games.
b Assume that Nicks 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?
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