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 $4,700,000 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 follows: $ 4,400,000 2,000,000 2,400,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 800,000 940,000 1,740,000 $ 660,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) 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? 4-6. Would Casey be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4A Req 4B What is the project's net present value? (Round your final answer to the nearest whole dollar amount.) Net present value Req 1 Reg 2 Reg 3 Reg 4A Reg 4B 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%.) Internal rate of return % Req 1 Reg 2 Req3 Reg 4A Reg 4B What is the project's simple rate of return? (Round your answer to 1 decimal place.) Simple rate of return % Reg 1 Reg 2 Reg 3 Req 4A Reg 4B Would the company want Casey to pursue this investment opportunity? OYes Ono Req 1 Reg 2 Reg 3 Reg 4A Req 4B Would Casey be inclined to pursue this investment opportunity? OYes ONO EXHIBIT 14B-1 Present Value of Sl; 1 (1+r) n 0.467 0.225 0.557 0.083 Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 4% 5% 6% 7% 0.962 0.952 0.943 0.935 0.925 0.907 0.890 0.873 0.889 0.864 0.840 0.816 0.855 0.823 0.792 0.763 0.822 0.784 0.747 0.713 0.790 0.746 0.705 0.666 0.760 0.711 0.665 0.623 0.731 0.677 0.627 0.582 0.703 0.6450.592 0.544 0.676 0.614 0.558 0.508 0.650 0.585 0.527 0.475 0.625 0.497 0.444 0.601 0.530 0.469 0.415 0.577 0.505 0.442 0.388 0.555 0.481 0.417 0.362 0.534 0.458 0.394 0.339 0.513 0.436 0.371 0.317 0.494 0.416 0.350 0.296 0.475 0.396 0.331 0.277 0.456 0.377 0.312 0.258 0.439 0.359 0.294 0.242 0.422 0.342 0.278 0.226 0.406 0.326 0.262 0.211 0.390 0.310 0.247 0.197 0.375 0.295 0.233 0.184 0.361 0.281 0.220 0.172 0.347 0.268 0.207 0.161 0.333 0.255 0.196 0.150 0.321 0.243 0.185 0.141 0.308 0.231 0.174 0.131 0.208 0.142 0.097 0.067 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 | 0.840 0.833 0.826 0.820 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.7180.706 0.694 0.683 0.672 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.540 0.502 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.2490.233 0.218 0.204 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.209 0.194 0.180 0.167 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.1020.092 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.270 | 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 | 0.069 0.060 0.052 0.045 0.039 0.034 0.250 0.212 0.1800.153 0.130 0.111 0.095 0.081 0.069 0.059 | 0.051 0.044 0.038 0.032 0.028 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 | 0.043 0.037 0.031 0.026 0.022 0.019 0.1990.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 | 0.026 0.022 0.018 0.015 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.170 0.138 0.112 0.091 0.074 | 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.158 0.126 0.1020.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.146 0.116 0.092 0.074 | 0.059 0.047 0.038 0.030 0.024 0.0200.016 0.013 | 0.010 0.009 0.007 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.0160.012 0.010 | 0.008 0.006 0.005 0.004 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 | 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.0120.009 0.007 0.005 0.004 | 0.003 0.003 0.046 0.032 0.022 0.015 0.0110.008 0.005 0.0040.003 0.002 0.001 0.001 0.001 0.000 0.000 23% 24% 25% 0.813 0.806 0.800 0.661 0.650 0.640 0.537 0.524 0.512 0.437 0.423 0.410 0.355 0.341 0.328 0.289 0.275 0.262 0.235 0.222 0.210 0.191 0.179 0.168 0.155 0.144 0.134 0.126 0.116 0.107 0.103 0.094 0.086 0.076 0.069 0.068 0.061 0.055 0.055 0.049 0.044 0.045 0.040 0.035 0.036 0.032 0.028 0.030 | 0.026 0.023 0.024 0.021 0.018 0.020 0.017 0.014 0.0160.014 0.012 0.013 0.011 0.009 0.011 0.009 0.007 0.009 0.007 0.006 0.007 0.006 0.005 0.006 0.005 0.004 0.005 0.004 0.003 0.003 0.002 0.003 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.001 0.000 0.000 0.000 0.292 0.004 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears: 11[1-1(1+r)n] Periods 1 2 3 4 2.798 2.951 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 | 2.402 2.361 2.322 2.283 3.630 3.546 3.46 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 | 3.352 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 | 4.772 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 9.383 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.1225.8425.583 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 11.11810.380 | 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 12.166 | 11.274 10.477 | 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 12.659 11.690 10.828 10.0599.372 8.756 8.201 7.702 7.250 6.840 6.467 | 6.128 13.134 | 12.085 | 11.158 10.336 9.604 8.950 8.365 | 7.8397.366 6.938 6.550 6.198 13.590 12.462 | 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 14.451 | 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7.170 6.743 6.359 14.857 13.489 | 12.303 11.272 10.371 9.580 8.883 | 8.266 7.718 7.230 6.792 6.399 15.247 | 13.799 | 12.550 11.469 | 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 16.330 14.643 13.211 11.987 10.935 | 10.027 9.237 8.548 7.943 7.409 6.935 6.514 16.663 14.898 | 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 | 6.961 6.534 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.0227.470 6.983 6.551 17.292 15.372 13.765 12.409 | 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 19.793 17.159 15.046 13.332 11.925 10.757 | 9.779 | 8.951 8.244 7.634 7.105 6.642 16% 17% 18% 19% 0.862 0.855 0.847 0.840 1.605 1.585 1.566 1.547 2.246 2.210 2.174 2.140 2.743 2.690 2.639 3.274 3.199 3.127 3.058 3.685 3.589 3.498 3.410 4.039 3.922 3.812 3.706 4.344 4.207 4.078 3.954 4.607 4.451 4.303 4.163 4.833 4.659 4.494 4.339 5.029 4.836 4.656 4.486 5.197 4.988 4.793 4.611 5.342 5.118 4.910 4.715 5.468 5.229 5.008 4.802 5.575 5.324 5.092 4.876 5.668 5.40 5.162 4.938 5.749 5.475 5.222 4.990 5.818 5.534 5.273 5.033 5.8775.584 5.316 5.070 5.929 5.628 5.3535.101 5.973 5.665 5.384 5.127 6.011 5.696 5.410 5.149 6.044 5.723 5.432 5.167 6.073 5.746 5.451 5.182 5.766 5.467 5.195 6.118 5.783 5.480 5.206 6.136 5.798 5.492 5.215 6.1525.810 5.502 5.223 6.166 5.820 5.510 5.229 6.177 5.829 5.517 5.235 6.233 5.871 5.548 5.258 20% 21% 22% 23% 24% 25% 0.833 0.826 0.820 0.813 0.806 0.800 1.528 1.509 1.492 1.474 1.457 1.440 2.106 2.074 2.042 2.011 1.981 1.952 2.589 2.540 2.494 2.448 2.404 2.362 2.991 2.926 2.864 | 2.803 2.745 2.689 3.326 3.245 3.167 3.092 3.020 3.605 3.508 3.416 3.327 3.242 3.161 3.837 3.726 3.619 3.518 3.421 3.329 4.031 3.905 3.786 3.673 3.566 3.463 4.192 4.054 3.923 3.799 3.682 3.571 4.327 4.177 4.035 3.902 3.776 3.656 4.439 4.278 4.127 3.985 3.851 3.725 4.533 4.362 4.203 4.053 3.912 3.780 4.611 4.432 4.265 4.108 3.962 3.824 4.675 4.489 4.315 4.153 4.001 3.859 4.730 4.536 4.357 4.189 4.033 3.887 4.775 4.576 4.391 4.219 4.059 3.910 4.812 4.608 4.419 4.243 4.080 3.928 4.843 4.635 4.442 4.263 4.097 3.942 4.870 4.657 4.460 4.279 4.110 3.954 4.891 4.675 4.476 4.292 4.121 3.963 4.909 4.690 4.488 4.302 4.130 3.970 4.925 4.703 4.499 4.311 4.137 3.976 4.937 4.713 4.507 4.318 4.143 3.981 4.948 4.514 4.323 4.147 3.985 4.956 4.728 4.520 4.328 4.151 3.988 4.964 4.734 4.524 4.332 4.154 3.990 4.970 4.739 4.528 4.335 4.157 3.992 4.975 4.743 4.531 4.337 4.159 3.994 4.979 4.746 4.534 4.339 4.160 3.995 4.997 4.760 4.544 4.347 4.166 3.999 6.097 4.721