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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment ( ROI )

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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's 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 $5,850,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 20%. The project would provide net operating income each year for five years as follows:
Sales
Variable expenses
Contribution margin
Fixed expenses:
$5,2,
2,32,
2,88,
Advertising, salaries, and other fixed outof-pocket costs
Depreciation
Total fixed expenses
Net operating income
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Requlred:
What is the project's net present value?
2 What is the project's internal rate of return to the nearest whole percent?
What is the project's 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?
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