nick’s novelties tTmhe soiowng wmormorcon appies to he questrons dspiayed below)

ID: 2581747 • Letter: N

Question

nick’s novelties tTmhe soiowng wmormorcon appies to he questrons dspiayed below) Nicks Novelties, Inc, is considening the purchase of new electronic games to place in its a The games would cost a total of $300000, have an eight-year useful life, and have a total salvage value of $20000 The company estimates thet annusl revenues and expenses associated with the games would be $200.000 Less operating expenses: Commissions to amusement houses Insurance $100,000 7000 168 000 160.000 18,000160,000 Net operating income s 40.000 3. 100 points 2a. Compute the simple rate of return promised by the games. (Round your answer to 1 decimal place. ie, 0.123 should be considered as 12.3%.) ple rate of ir 3%

Explanation / Answer

simple rate of return in percentage

(net operating income/initial investment)*100

(40000/300000)*100

13.3%

Net operating income

40000

Initial investment

300000