5 Exercise 13-9 Net Present Value Analysis and Simple Rate of Return (LO13-2, LO13-6) 12.5 points Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,700,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 16%. The project would provide net operating income each year for five years as follows: 8 04:53:29 $3,100,000 1,300,000 1,800,000 eBook Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costa Depreciation Total fixed expenses Net aperating income $ 660,000 740,00D Hint 1,400,000 $ 400,000 Print References Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return. 3a. Would the company want Derrick to pursue this investment opportunity? 3b. Would Derrick be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3A Req 3B Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Net present value 5 Exercise 13-9 Net Present Value Analysis and Simple Rate of Return (LO13-2, LO13-6] 12.5 points Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,700,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 16%. The project would provide net operating income each year for five years as follows: X 04:53:08 $3,100,000 1,300,000 1,800,000 eBook Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $ 660,000 740,000 Hint 1,400,000 400,000 Net operating income Print Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. References Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return. 3a. Would the company want Derrick to pursue this investment opportunity? 3b. Would Derrick be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3A Reg 3B Compute the project's simple rate of return. (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Simple rate of return %