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Ch. 14 please answer all parts Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's
Ch. 14 please answer all parts
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 24% each of the last three years. Casey is considering a capital budgeting project that would require a $5,950,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 20%. The project would provide net operating income each year for five years as follows: $ 5,300,000 2,360,000 2,940,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 890,000 1,190,000 2,080,000 $ 860,000 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-b. 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 Req 3 Req 4A Req 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 Reg 3 Req 4A Req 4B What is the project's simple rate of return? (Round your answer to 1 decimal place.) Simple rate of return % Req 1 Reg 2 Req 3 Req 4A Req 4B Would the company want Casey to pursue this investment opportunity? OYes No Req 1 Req 2 Reg 3 Req 4A Req 4B Would Casey be inclined to pursue this investment opportunity? OYes ONOStep by Step Solution
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