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 21% each of the last three years. Casey is considering a capital budgeting project that would require a $3,700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 17%. The project would provide net operating income each year for five years as follows: $ 3,600,000 1,680,000 1,920,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses Net operating income $ 720,000 740,000 1,460,000 $ 460,000 Click here to view Exhibit 12B-1 and Exhibit 12B-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? 4-5. Would Casey be inclined to pursue this investment opportunity? EXHIBIT 12B-1 Present Value of Sl: 1 (1+rn 11% 16% 0.797 0.516 0.499 0.507 0.205 Periods 1 2 3 4 5 6 7 3 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% 12% 13% 14% 15% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 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 | 0.813 0.806 0.800 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.783 0.769 0.756 0.743 0.731 0.7180.706 0.694 0.683 0.672 0.661 0.650 0.640 0.889 0.864 0.840 0.816 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 0.537 0.524 0.512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.482 0.467 0.451 0.437 0.423 0.410 0.822 0.784 0.747 0.713 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 0.355 0.341 0.328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.2890.275 0.262 0.760 0.711 0.665 0.623 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 0.235 0.222 0.210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.6450.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 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 0.126 0.116 0.107 0.650 0.585 0.527 0.475 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 0.103 0.094 0.086 0.625 0.557 0.497 0.444 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 0.102 0.092 0.083 0.076 0.069 0.601 0.530 0.469 0.415 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 0.068 0.061 0.055 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.555 0.481 0.417 0.362 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 0.045 0.040 0.035 0.534 0.458 0.394 0.339 0.292 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 0.036 0.032 0.028 0.513 0.436 0.371 0.317 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 0.030 0.026 0.023 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.475 0.396 0.331 0.277 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 0.020 0.017 0.014 0.456 0.377 | 0.312 0.258 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 0.016 | 0.014 0.012 0.439 0.359 0.294 0.2420.199 0.164 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 0.013 0.011 0.009 0.422 0.342 0.278 0.226 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 0.011 0.009 0.007 0.406 0.326 0.262 0.211 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 0.009 0.007 0.006 0.390 0.310 0.247 0.197 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 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 | 0.016 0.013 0.010 0.00 0.007 0.006 0.005 0.004 0.361 0.281 0.220 0.172 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 0.005 0.004 0.003 0.347 0.268 0.207 0.161 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 0.004 0.003 0.002 0.333 0.255 0.1960.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 | 0.0160.0120.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 0.243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.0110.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 | 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.0110.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears: 1/r(1-(1/(1+r)^n)) 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% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 0.962 22% 24% 0.952 23% 25% 0.943 0.935 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 0.813 0.806 1.886 1.859 0.800 1.833 1.808 1.783 1.759 1.736 | 1.713 1.690 1.668 1.647 1.626 1.605 1.585 | 1.566 1.5471.528 1.509 2.775 1.492 | 1.474 2.723 1.457 | 1.440 2.673 2.624 2.577 2.531 2.487 2.444 | 2.402 2.361 2.322 2.283 2.246 2.210 | 2.174 | 2.140 2.106 2.074 3.630 2.042 1.981 3.546 2.011 3.465 3.387 1.952 3.312 3.240 3.170 3.102 3.037 2.974 | 2.914 2.855 2.798 | 2.743 2.690 2.639 4.452 2.589 2.540 2.494 2.448 4.329 2.404 2.362 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 | 3.058 2.991 2.926 2.864 5.2425.076 2.803 2.745 2.689 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.9983.889 3.784 3.685 3.589 3.498 3.410 6.002 3.326 3.245 3.167 5.786 5.582 3.092 3.020 | 2.951 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 6.733 6.463 3.242 6.210 5.971 5.747 3.161 5.535 5.335 5.146 | 4.968 4.799 4.639 | 4.487 4.344 4.207 4.078 3.954 3.837 7.435 3.726 3.619 7.108 6.802 6.515 6.247 3.518 3.421 3.329 5.9955.759 5.537 5.328 5.132 4.9464.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 8.760 8.306 3.923 3.799 3.682 3.571 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.4535.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 9.385 3.902 8.863 8.384 7.943 3.776 3.656 7.536 7.161 | 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 9.986 4.278 9.394 4.127 3.985 8.853 8.358 3.851 3.725 7.904 7.487 7.103 6.750 6.424 6.122 5.8425.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 10.563 9.899 4.053 3.912 8.745 3.780 9.295 8.244 7.786 7.3676.982 6.628 6.302 6.0025.724 5.468 5.229 5.008 4.802 4.611 4.432 11.118 10.380 | 9.712 4.265 4.108 3.962 9.108 8.559 3.824 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 11.652 10.838 10.106 4.315 4.153 9.447 4.001 3.859 8.851 8.313 7.824 7.379 6.9746.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 12.166 | 11.274 10.477 | 9.763 9.122 4.189 4.033 3.88 8.544 8.022 7.549 7.120 6.7296.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 12.659 11.690 10.828 10.059 9.372 4.059 3.910 8.7568.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 13.134 12.085 11.158 10.336 9.604 4.419 4.243 4.080 3.928 8.950 8.365 7.839 7.366 | 6.938 6.550 6.198 5.8775.584 5.316 5.070 4.843 4.635 13.590 12.462 11.470 10.594 | 9.818 4.442 | 4.263 4.097 3.942 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.3535.101 4.870 4.657 4.460 4.279 4.110 14.029 12.821 | 11.764 10.836 10.017 | 9.292 3.954 8.649 8.075 7.562 7.1026.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 14.451 | 13.163 12.042 | 11.061 10.201 4.292 4.121 3.963 9.442 8.7728.176 7.645 7.170 6.743 6.359 6.011 | 5.696 5.410 5.149 4.909 4.690 14.857 13.489 12.303 11.272 10.371 4.488 4.302 4.130 3.970 9.580 8.883 | 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 4.499 4.311 4.137 3.976 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 15.622 14.094 12.783 11.654 10.675 9.8239.077 8.422 4.143 3.981 7.843 7.330 6.873 6.464 6.097 5.7665.467 5.195 4.9484.721 15.983 14.375 | 13.003 11.826 10.810 | 9.929 | 9.161 4.514 4.323 4.147 3.985 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 16.330 14.643 13.211 11.987 10.935 10.027 | 9.237 4.151 3.988 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 16.663 14.898 13.406 12.13711.051 10.116 | 9.307 8.602 3.990 7.984 7.441 | 6.961 6.534 6.152 5.810 5.5025.223 4.970 4.739 4.528 4.335 4.157 16.984 15.141 | 13.591 | 12.278 11.158 10.1989.370 8.650 3.992 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 17.292 15.372 13.765 | 12.409 11.258 10.274 | 9.4278.694 4.531 4.337 4.159 3.994 8.055 7.496 | 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 19.793 17.159 15.046 13.332 11.925 10.757 | 9.779 4.534 4.339 4.160 3.995 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 What is the project's net present value? (Round your final answer to the nearest whole dollar amount.) Net present value 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 % What is the project's simple rate of return? (Round your answer to 1 decimal place.) Simple rate of return % Would the company want Casey to pursue this investment opportunity? Yes ONO Would Casey be inclined to pursue this investment opportunity? OYes Ono