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 23% each of the last three years. Casey is considering a capital budgeting project that would require a $5,380,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follow:

Sales4,800,000

Variable expenses 2,160,000

Contribution margin 2,640,000

Fixed expenses:

Advertising, salaries, and other

Fixed out of pocket cost840,000

Depreciation1.076,000

Total fixed expenses1,916,000

Net operating income724,000

Brewer_8e_Rechecks_2020_01_30

Click here to viewExhibit 12B-1andExhibit 12B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the project's net present value? (Round your final answer to the nearest whole dollar amount.)

2. What is the project's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.)

3.What is the project's simple rate of return? (Round your answer to 1 decimal place.)

4-a. Would the company want Casey to pursue this investment opportunity? Yes or No

4-b. Would Casey be inclined to pursue this investment opportunity? Yes or No