Compute the simple rate of return on mythical marauders

Reference no: EM131928182

Problem

Saitama Amusements Corporation places electronic games and other amusement devices in supermarkets and similar outlets throughout Japan. Saitama Amusements is investigating the purchase of a new electronic game called Mythical Marauders. The manufacturer will sell 20 games to Saitama Amusements for a total price of ¥185,000. (The Japanese currency is the yen, which is denoted by the symbol ¥.) Saitama Amusements has determined the following additional information about the game:

a. The game would have a four-year useful life and a negligible salvage value. The company uses straight-line depreciation.

b. The game would replace other games that are unpopular and generating little revenue. These other games would be sold for a total of ¥25,500.

c. Saitama Amusements estimates that Mythical Marauders would generate annual incremental revenues of ¥225,000 (total for all 20 games). Annual incremental out-of-pocket costs would be (in total): maintenance, ¥48,500; and insurance, ¥9,100. In addition, Saitama Amusements would have to pay a commission of 41% of total revenues to the supermarkets and other outlets in which the games were placed. (Ignore income taxes.)

Required:

1. Prepare a contribution format income statement showing the net operating income each year from Mythical Marauders.

2a. Compute the simple rate of return on Mythical Marauders.

3a. Compute the payback period on Mythical Marauders.

Reference no: EM131928182

Questions Cloud

Create a schedule of cost of goods manufactured : Prepare a schedule of cost of goods sold. Create a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

Direct method for cost allocation : Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration

How long would it have taken eileen to save : How long would it have taken Eileen to save for the outright purchase of the car if she did not have any credit card debt and used.

What is the balloon payment for the mortgage : A 4.41% balloon mortgage for $259,754 has the terms 25/3. The remaining balance at the end of the initial period is $241,470.00.

Compute the simple rate of return on mythical marauders : Compute the simple rate of return on Mythical Marauders. Prepare a contribution format income statement showing the net operating income each year.

What is the terminal value of the firm at time 3 : The firm's cash flow at Time 3 is $62,500. The cash flows have a 2.7% rate of growth. What is the terminal value of the firm at Time 3?

Compute the bond current yield : A 4.20 percent coupon municipal bond has 14 years left to maturity and has a price quote of 97.55. The bond can be called in four years.

Prepare the appropriate journal entry to record income taxes : In 2018, Ryan Management collected rent revenue for 2019 tenant occupancy. Prepare the appropriate journal entry to record income taxes

Which one would you choose according to npv : a. According to IRR, which project would you choose no matter the opportunity cost?

User Account

All Pages