Exercise 14-8 (Static) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [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 an eight-year useful life, and have a total salvage value of $20,000. 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 $100,000 7,000 35,000 18,000 Insurance Depreciation Maintenance 160,000 Net operating income $ 40,000 Exercise 14-8 Part 1 (Static) Required: la. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Ic., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
Exercise 14-8 (Static) Payback Period and Simple Rate of Return [LO14-1, LO14-6] [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 an eight-year useful life, and have a total salvage value of $20,000. 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 $100,000 7,000 35,000 18,000 Insurance Depreciation Maintenance 160,000 Net operating income $ 40,000 Exercise 14-8 Part 1 (Static) Required: la. Compute the payback period associated with the new electronic games. 1b. Assume that Nick's Novelties, Ic., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 11P: REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old...
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