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Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its...

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Accounting

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 $475,000, have a fifteen-year useful life, and have a total salvage value of $47,500. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues: ______________$240,000
Less operating expenses:
Commissions to amusement houses : $70,000
Insurance: $45,000
Depriciation: $28,500
Maintenance: $30,000____________$173,500
Net operationg income is (240,000-173,500) $66,500
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 10%, will the games be purchased?

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