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 $5,050,000 investment in equipment with a useful life of ve years and no salvage value. Pigeon Company's discount rate is 20%. The project would provide net operating income each year for ve years as follows: Sales $4,700,000 Variable expenses 2,120,000 Contribution margin 2,500,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 330,000 Depreciation 1,010,000 Total fixed expenses 1,040,000 Net operating income 5 740,000 [ Click here to view Exhibit 143-1 and Exhibit 143-2, to determine the appropriate discount factorls) using tables. Required: 1. What is the project's net present value? 2. What is the project's internal rate of return to the nearest whole percent? 3. 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? Complete this question by entering your answers in the tabs below. What is the project's net present value? (Round your nal answer to the nearest whole dollar amount.) Jackson County Senior Services is a nonprot organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Home Meals 011 House Total Nursing Wheels keeping Revenues $929,000 a 260,000 5 403,000 $ 250,000 Variable expenses 468,000 119,000 195,000 154,000 Contribution margin 461,000 149,000 200,000 104,000 Fixed expenses: Depreciation 69,500 0,600 40,500 20,400 Liability insurance 44,200 20,600 7,100 15,900 Program administrators' salaries 116,400 40,900 38,900 36,600 General administrative overhead* 185,800 53,600 80,600 51,600 Total fixed expenses 415,900 123,700 167,700 124,500 Net operating income (loss) $ 45,100 $ 257300 5 40.300 $907500) *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $45,100 to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. lfthe program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. What is the nancial advantage {disadvantage} of discontinuing the Housekeeping program? 1-b. Based on the nancial advantage {disadvantage} ofdiscontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued? 2-a. Prepare a properly formatted segmented income statement. 2-b. Would a segmented income statement format be more useful to management in assessing the long-run nancial viability of the various services? Complete this question by entering your answers in the tabs below. Reg 1A Reg 13 Reg ZA Req ZB What is the nancial advantage (disadvantage) of discontinuing the Housekeeping program
