1. Calculate the internal rate of return for each product. Round answer to 1 decimal place.

2. Calculate the project profitability index for each product. Round discount factors to 3 decimal places. Round answers to 2 decimal places.

3. Calculate the simple rate of return for each product. Round percentage answer to 1 decimal place.

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division's return on investment (RO), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage value) $350,000 550,000 Annual revenues and costs: Sales revenues $390,000 470,000 Variable expenses $178,000 210,000 Depreciation expense 51,000 93,000 Fixed out-of-pocket operating costs 87,000 67,000 The company's discount rate is 20%