Seven Day Mini Mart Is Considering Installing Video Games in Its

question 95

Essay

Seven Day Mini Mart is considering installing video games in its stores.The machines cost $300,000 and have an estimated six-year useful life.Ignore income taxes.The following projected income statement is provided:
$\begin{array}{lr}\text { Video game revenue}&&\$100,000\\\text { Tess exnenses:}\\\text { Electricity, Supplies, etc. } & \$ 2,000 \\\text { Insurance } & 7,000 \\\text { Maintenance } & 1,000 \\\text { Depreciation } & \underline{50,000}&\underline{60,000} \\\text { Net income } &&\underline{\$40,000}\end{array}$ Required:
1)Seven Day Mini Mart would like to recoup its original investment in less than five years.Compute the payback period for the video game machine investment.Would you recommend that the machines be purchased? Why or why not?
2)Seven Day Mini Mart's target unadjusted rate of return is 12%.Compute the unadjusted rate of return on the original investment.Would you recommend that the machines be purchased? Why or why not?

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Definitions:

Constrained Power

The limitation of authority or control to prevent abuse and ensure it is used responsibly and justly.

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Social and cultural distinctions associated with being male, female, or non-binary, as opposed to biological differences.

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A social group typically consisting of parents and children living together or related by bloodlines, recognized by society as a fundamental unit.

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