10 1 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 (ROI), which has exceeded 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: points Product A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: $ 210,000 $ 420,000 Print Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 42,000 $ 84,000 $ 74,000 $ 54,000 $ 290,000 $ 390,000 $ 138,000 $ 186,000 References The company's discount rate is 19%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is preferred. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 6A Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period years years < Req 1 Req 2 > 10 1 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 (ROI), which has exceeded 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: points Product A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: $ 210,000 $ 420,000 Print Sales revenues Variable expenses Depreciation expense $ 290,000 $ 390,000 $ 138,000 $ 186,000 $ 42,000 $ 84,000 Fixed out-of-pocket operating costs $ 74,000 $ 54,000 References The company's discount rate is 19%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is preferred. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 6A Using Excel, calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product A Product B Net present value < Req 1 Req 3 > 10 1 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 (ROI), which has exceeded 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: points Product A Product B Initial investment: Cost of equipment (zero salvage value) $ 210,000 $ 420,000 Annual revenues and costs: Sales revenues $ 290,000 $ 390,000 Print Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 138,000 $ 186,000 $ 42,000 $ 84,000 $ 74,000 $ 54,000 References The company's discount rate is 19%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is preferred. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 6A Using Excel, calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Product A Product B Internal rate of return % % < Req 2 Req 4 > 1 10 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 (ROI), which has exceeded 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: points Product A Product B Cost of equipment (zero salvage value) Annual revenues and costs: $ 210,000 $ 420,000 $ 290,000 $ 390,000 Print Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 138,000 $ 186,000 $ 42,000 $ 84,000 $ 74,000 $ 54,000 References The company's discount rate is 19%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is preferred. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 6A Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Profitability index Product A Product B < Req 3 Req 6A > 10 1 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 (ROI), which has exceeded 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: points Product A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: $ 210,000 $ 420,000 Sales revenues $ 290,000 $ 390,000 Print Variable expenses $ 138,000 $ 186,000 Depreciation expense $ 42,000 $ 84,000 Fixed out-of-pocket operating costs $ 74,000 $ 54,000 References The company's discount rate is 19%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is preferred. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 6A For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period Internal Rate of Return < Req 4 Req 6A >