Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his divisions return on investment (ROI), which has been above 24% each of the last three years. Casey is considering a capital budgeting project that would require a $4,300,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Companys discount rate is 20%. The project would provide net operating income each year for five years as follows:

Sales $ 4,200,000

Variable expenses 1,920,000

Contribution margin 2,280,000

Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 780,000

Depreciation 860,000

Total fixed expenses 1,640,000

Net operating income $ 640,000

Required: 1. What is the projects net present value?

2. What is the projects internal rate of return to the nearest whole percent?

3. What is the projects simple rate of return?

4-a. Would the company want Casey to pursue this investment opportunity?

4-b. Would Casey be inclined to pursue this investment opportunity?