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 $ 5,200,000

Variable expenses 2,320,000

Contribution margin 2,880,000

Fixed expenses:

Advertising, salaries, and other

fixed out-of-pocket costs $ 880,000

Depreciation 1,170,000

Total fixed expenses 2,050,000

Net operating income $ 830,000

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?