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Can you please help me with the attached document? Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one
Can you please help me with the attached document?
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a fiveyear period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs Product B $ 250,000 $ 460,000 $ 300,000 $ 140,000 $ 39,000 $ 75,000 $ 400,000 $ 190,000 $ 81,000 $ 55,000 The company's discount rate is 18%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A (years) Product B (years) Payback period 2. Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.) Product A Product B Net present value 3. Calculate the internal rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and Round discount factor(s) to 3 decimal places.) Product A (%) Product B (%) Factor of the internal rate of return 4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.) Product A Project profitability index Product B 5. Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.) Product A (%) Product B (%) Simple rate of return 6a. For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period 6b. Based on the simple rate of return, Lou Barlow would likely: Accept Product A Accept Product B Reject both products Internal Rate of RateStep by Step Solution
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