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 $20\%$ each of the last three years. Casey is

considering a capital budgeting project that would require a $$3,600,000$

investment in equipment with a useful life of five years and no salvage

value. Pigeon Company$$s discount rate is $16\%.$ The project would

provide net operating income each year for five years as follows:

Sales $

Variable expenses

Contribution margin

Fixed expenses:

Advertising, salaries, and other fixed outof$-$pocket costs $ $710,000$

Depreciation $720,000$

Total fixed expenses

Net operating income

Click here to view Exhibit $12$B$-1$ and Exhibit $12$B$-2,$ 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?

$4-$b$.$ Would Casey be inclined to pursue this investment opportunity?

$$ Req $1$ Req $3$

Complete this question by entering your answers in the tabs below.

What is the project$$s internal rate of return? $($Round your answer to the near

considered as $12\%.)$