Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement...
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 $425,000, have a fifteen-year useful life, and have a total salvage value of $42,500. The company estimates that annual revenues and expenses associated with the games would be as follows:
| Revenues | $ | 220,000 | |||
| Less operating expenses: | |||||
| Commissions to amusement houses | $ | 70,000 | |||
| Insurance | 25,000 | ||||
| Depreciation | 25,500 | ||||
| Maintenance | 40,000 | 160,500 | |||
| Net operating income | $ | 59,500 | |||
Exercise 12-8 Part 2
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 11%, will the games be purchased?
Homework Answers
| 2a | |
| Net operating income | 59500 |
| / Investment cost | 425000 |
| Simple rate of return | 14% |
| 2b |
| Yes, the games will be purchased as simple rate of return exceeds 11% |
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Nick’s Novelties, Inc., is considering the purchase of new
electronic games to place in its amusement...
Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement...
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 $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 280,000 Less operating expenses: Commissions to amusement houses $ 80,000 Insurance 57,000 Depreciation 19,920 Maintenance 60,000 216,920 Net operating income $ 63,080 Garrison 16e...
Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement...
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 $380,000, have a fifteen-year useful life, and have a total salvage value of $38,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 60,000 Insurance 65,000 Depreciation 22,800 Maintenance 80,000 227,800 Net operating income $ 72,200 Garrison 16e...
Check my work Nick's Novelties, Inc., is considering the purchase of new electronic games to place...
Check my work 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Part 2 of 2 $300,000 10 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $90,000 72,000 23,520...
Required information The following information applies to the questions displayed below,] Nick's Novelties, Inc., Is considering...
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 $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 $220,000 Less operating expenses Commissions to amusement houses $60,000 55,000 19,500 40,000 Insurance Depreciation...
Required information [The following information applies to the questions displayed below.] Nick's Novelties, Inc., is considering...
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 $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 280,000 Revenues Less operating expenses: Commissions to amusement cona houses Insurance 57,000 Depreciation 19,920...
Check my work Nick's Novelties, Inc., is considering the purchase of new electronic games to place...
Check my work 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Part 1 of 2 $300,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $90,000 72,000 23,520 40,000...
Required information Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6] [The following information...
Required information Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6] [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 $350,000, have a fifteen-year useful life, and have a total salvage value of $35,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 220,000 Less...
Required information Exercise 12-8 Payback Period and Simple Rate of Return (LO12-1, LO12-6) [The following information...
Required information Exercise 12-8 Payback Period and Simple Rate of Return (LO12-1, LO12-6) [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 $385,000, have a fifteen-year useful life, and have a total salvage value of $38,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $280,000 Revenues Less operating...
Required information Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6] [The following information...
Required information Exercise 12-8 Payback Period and Simple Rate of Return [LO12-1, LO12-6] [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 $350,000, have a fifteen-year useful life, and have a total salvage value of $35,000. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 220,000 Less...
EXERCISE 7-8 Payback Period and Simple Rate of Return L07-1, L07-6 Nick's Novelties, Inc., is considering...
EXERCISE 7-8 Payback Period and Simple Rate of Return L07-1, L07-6 Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amuse. ment 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 associ. ated with the games would be as follows: $200,000 Revenues Less operating expenses: Commissions to amusement houses. Insurance Depreciation.. Maintenance Net...
Check my work 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Part 2 of 2 $300,000 10 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $90,000 72,000 23,520...
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 $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 $220,000 Less operating expenses Commissions to amusement houses $60,000 55,000 19,500 40,000 Insurance Depreciation...
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 $332,000, have a fifteen-year useful life, and have a total salvage value of $33,200. The company estimates that annual revenues and expenses associated with the games would be as follows: $ 280,000 Revenues Less operating expenses: Commissions to amusement cona houses Insurance 57,000 Depreciation 19,920...
Check my work 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 $392,000, have a fifteen-year useful life, and have a total salvage value of $39,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Part 1 of 2 $300,000 Revenues Less operating expenses: Commissions to amusement houses Insurance Depreciation Maintenance Net operating income $90,000 72,000 23,520 40,000...
Required information Exercise 12-8 Payback Period and Simple Rate of Return (LO12-1, LO12-6) [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 $385,000, have a fifteen-year useful life, and have a total salvage value of $38,500. The company estimates that annual revenues and expenses associated with the games would be as follows: $280,000 Revenues Less operating...
EXERCISE 7-8 Payback Period and Simple Rate of Return L07-1, L07-6 Nick's Novelties, Inc., is considering the purchase of new electronic games to place in its amuse. ment 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 associ. ated with the games would be as follows: $200,000 Revenues Less operating expenses: Commissions to amusement houses. Insurance Depreciation.. Maintenance Net...
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