Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his divisions 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 $5,800,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Companys discount rate is 19%. The project would provide net operating income each year for five years as follows:

Sales		$	5,100,000
Variable expenses			2,280,000
Contribution margin			2,820,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$870,000
Depreciation	1,160,000
Total fixed expenses			2,030,000
Net operating income		$	790,000

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1.

What is the projects net present value? (Round discount factor(s) to 3 decimal places.)

2.

What is the projects internal rate of return to the nearest whole percent?

3.	What is the projects simple rate of return? (Round percentage answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.)

4-a.

Would the company want Casey to pursue this investment opportunity?

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