chapt. 7. Please help.

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product Initial investment Cost of equipment (zero salvage value) $190,000 $585,000 Annual revenues and costs Sales revenues $420,000 $500,000 Variable expenses $ 105,000 $ 222,000 Depreciation expense $ 78,000 $ 117,000 Fixed out of pocket operating costs $90,000 $ 70,000 The company's discount rate is 21%. Click here to view Exhibit /B1 and Exhibit78.2. to determine the appropriate discount factor using tables Required: 1 Calculate the payback period for each product 2. Calculate the net present value for each product 3. Calculate the internal rate of return for each product. 4. Calculate the project profitability index for each product 5. Calculate the simple rate of return for each product 6a. For each measure, identify whether Product A or Product B is preferred 6b. Based on the simple rate of return, Lou Barlow would likely: EXHIBIT 70-1 Present Value of $1 Periods 4% 5 6% 8 10% 11% 12 13% 14% 16% 17% 18 20% 212 22% 1 23% 244 259 0962 0952 0943 0935 0926 0917 09090901 0893 08850872 08700862 0855 0842 08400833 08260820 080 0806 0800 2 0925 0907 0890 0873 0857 0842 0826 0812 0797 0783 0769 0756 0743 0731 0718 0 706 064 068 0672 0661 0650 0640 3 0889 0864 084008160794 0772 0751 0731 071206930675 0658 0641 0624 06090593 0579 0564 0551 0537 0524 0512 4 0855 0823 0792 0763 0735 0708 0683 0659 0636 06130592 0572 0552 0534 0516 0499 0482 04670451 07 0423 0410 5 0822 0784 0747 0713 0681 0650 0621 0593 0.567 0543 0519 0497 0.476 0.456 0437 0419 0402 0386 03700355 0341 0328 6 0790 0746 0705 0666 0630 0596 0564 0535 0507 0480 0456 0432 04100390 0370 0352 0335 0.319 0300 0289 0275 0262 7 0760 0711 0665 0623 0583 0547 0513 0482 0.452 0425 0.400 0376 354 0333 0714 0.296 0229 0263 0249 0235 0222 0210 8 0731 0677 0627 0582 0540 0502 04670434 0404 0376 0.351 0327 03050285 0266 0249 020 0218 02040191 01790168 9 0 703 0645 0592 0544 0500 0.460 0424 0391 0361 0333 0.308 0284 0263 0243 0225 0209 0194 010 0167 0155 014 0134 10 0676 064 0558 0508 0463 0422 0386 0352 0322 0295 0270 0247 0227 0208 0191 0176 01620149 0137 0126010507 11 0650 0585 0527 0475 0429 0388 0350 0317 0287 026 0237 02150195 0170820148 005 023 012 0103 004 000 0625 0.557 0497 0444 0.397 0356 0319 0286 0257 0231 0208 0187 0168 0152 0237 0124 0112 0302 009200000059 0601 0530 0469 04150368 0326 0290 0258 0.229 0204 0182 0163 0145 0130 0116 0104 0093 0.08 0.075 0068 0.0610055 14 0577 0505 0442 0388 0340 0299 0263 0232 0205 0181 0160 0541 0125 0111 0099 0088 0078 0063 062 0055 0049 0044 15 0.555 0481 0417 0.362 0315 0.275 0239 0209 0183 0160 0.1400123 01080095 0084 0074 0065 0057 0.051 0045 00400035 16 0534 0458 0394 0339 0292 0252 02180188 0163 0141 0123 0107 0093 0081 0071 0.062 0054 0047 004200360032 0028 17 05130436 0371 03170270 0231 0198 01700146 0125 0108 0093 0.0800069 0060 0,052 0045 0039 0034 0030 0026 0023 18 0494 0416 0.350 0296 0.250 0212 01800153 0130 0111 0095 0081 0069 0059 0051 0044 0038 0032 0028 0024 0021 0018 19 0.475 0396 0331 0277 0232 0.194 0164 0138 0116 0098 0083 007000500051 0043 0.037 0031 0027 0023 002000170014 20 0456 0377 0312 0258 0.215 0178 014901240104 0087 0.073 0061 0051 0043 0037 0031 0026 0.0220019, 004 0014 0012 21 0.439 0359 0294 0242 0199 0164 01350112 0093 0077 0064 0053 0044 0037 0031 0026 0022 0.018 0015003 0011 0009 22 0.422 0342 02780226 0184 01500123 0101 00820068 0056 00460038 0032 0026 0022 0018 0015 0013 0011 0009 0007 23 04060326 0262 0.211 0.170 0138 0112 0091 0074 00500049 0040 0033 0027 00220018 0015 0012 0.0100009 0007 0005 24 0390 0.310 0247 0197 0158 0126 0102 0082_0066 0053 0043 0035 0028 0023 0.019 00150013 0010 0008 0.007 0.006 0005 25 0.375 0.295 0233 0184 0146 0116 0092 0074 0059 0047 0038 00300024 0020 0016 0.03 0010 0009 0007 0006 0.005 0004 26 0361 0281 0220 0172 0135 0.106 0.084 0066 0053 0042 003 0026 0021 0.07 0.014 0011 0009 0007 0006 0.005 0004 0003 27 0347 0268 0207 0161 0125 0098 0.076 0.060 0047 0037 0029 0023 0.018 0010011 0.009 0007 0006 0.005 0.004 0.003 0002 28 0333 0255 0196 0150 0116 0090 0069 0054 0042 0.033 0026 0020 0096 0012 0010 0.008 0006 0005 0004 0.003 0.002 0.002 29 0321 0243 0185 0141 0107 0082 0063 0048 0037 0029 0.02200170014 0011 0008 0006 0005 004 0003 0002 0.002 0.002 30 0308 0231 0174 0131 0099 0075 0057 0.044 0033 0026 0020 001 002 0009 0007 0005 0004 0.003 0003 0002 0.002 0.001 40 0208 0142 0097 0067 0046 0032 0022 0015 oon 0008 0.005 0004 0003 0002 0001 0001 0001 0000 0000 0000 0000 0000 EXHIBIT 70-2 Present Value of an Annuity of 1 in Arrears! 2 Periods 4x 5% 6% 7 B% 9% 10% 17 13% 14% 15% 16% TE JMs 20% 21% 22% 23% 24% 25% 1 0962 0.952 0943 09350926 0917 0909 0 901 0893 0885 0877 08700862 0855 0847 08400833 0826 0820 081 0806 0800 2 1886 1859 1833 1808 1783 1759 1736 1713 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1492 1474 1457 1440 3 2775 2723 2673 2624 2577 2531 2.487 2444 2402 2361 2322 2283 2246 2210 2174 210 2106 2074 2012 2011 1981 1952 4 3630354634653387 3312 3.240 3170302 3037 2974 291 2855 2798 2743 2690 2639 2589 2540 2494 2448 2404 2362 5 4452 4329 4212 4900 39933890 391 3696 3605 3517 3.433 3352 3.274 3199 3127 3058 2991 2926 2864 2803 2745 2689 5242 50764917 4767 4623 4.486 4355 4231 4111 3998 3889 3784 3685 3589 3.498 3410 3326 3245 3567 3092 3020 2951 6002 5786 55825389 5.2065033 4 868 4712 4564 4423 4288 4160 4039 39223812 37063.605 3508 3416 3327 32423.161 6.733 6 463 6.210 5971 5747 5535 5335 516 4968 47994639 4487 4344 4207 4078 3954 3837 3726 3619 3518 3421 3329 9 7435 7108 6 802 6515 6247 5.995 5759 5537 5328 5132 4946 472 4607 4451 4303 4163 4031 3.905 3786 3.6733566 3163 10 8111 7722 7360 7024 6710 6.418 6145 5889 5650 5426 5 216 5019 4833 4659 4494 43394192 4054 3923 3.799 3682 3571 11 87608.306788774992139 6805 6495 6 207 5938 5687 5.453 5 234 5029 48364656 44864327 4177 4035 3.902 37763656 12 93858 863 83847943 7536 2161 6814 6.492 619 5918 5660 5421 5197 4988 47934611 4439 4278 4127 3985 3851 3725 9.986 9.394 8853 8.358 7904 7487 2103 67506424 6122 5842 5583 5342 5118 4910 47154533 43624203 4053 39123780 10563 98999295 8.745 8244 7786 7367 69826628 6 302 6.002 5724 5468 5229 5008 4.802 4611 4432 4265 408 962 3.824 15 11118 10 380 9712 9108 8559 8061 7606 7191 6.811 6462 612 58475575 5324 5092 4876 4675 4489 4315415340013859 11652 10.838 10106 9447 8851 8313 7824 7379 6974 6604 6265 5.954 5668 5405 5152 4938 47304536 4357 4589 403337 12 12166 11274 10.477 9763 9.122 8544 8.022 7519 120 6729 6373 6047 5749 5475 5222 4990 4775 4576 4391 4219 40583910 18 12,659 11690 10828 10059 9 372 8756 8 201 7702 7250 6840 64676128 5818 5531 5 273 5033 48124608 419 4243 4.680 3928 19 13.134 12085 11.158 10.336 9604 8950 8365 7839 7366 6938 6550 6198 5877 5584 S316 5070 4813 4635 442 4263 4097 3912 20 13.590 12 462 11.470 10.594 9818 9129 8514 7963 7469 7025 6.623 6 259 5929 5628 5353 5101 4870 4657 4460 4279 4110 3954 21 14029 12821 11764 10836 10 017 9292 8649 8075 2562 71026687 6312 5973 5665 5384 5127 4891 4675 4476 4292 4121 3963 22 14451 13163 12042 11061 10.201 9442 8712 8176 7645 7170 6743 6.359 60115696 5410 5149 4909 4690 4488 4302 41303970 14857 13 489 12 303 11272 10371 9580 8883 8266 7718 723067926399 6044 57235432 5167 4925 4703 4499 4311 407 3976 24 15 247 13.799 12 550 11469 10.529 9707 8.985 8348 7784 7283 6.835 6.434 6.073 5746 5451 5182 4937 4713 4507 4318 413 3.981 25 15622 M094 12783 11654 10675 9.823 9077 8.4227843 7330 6873 6 464 6097 5766 5467 51954948 4721 4514 4323 4173985 26 15 983 14 375 100311826 10810 9929 9161 8488 2896 7372 6.906 6 491 6118 5783 5.480 5.206 49564728 4520 4328 4151 3988 27 16330 14643 13 211 11987 10 935 10027 9237 8548 7943 7409 6935 6514 6136 5798 5492 5215 4964 4734 4524 433241543990 28 16.663 14898 13.406 12137 11051 10.116 9.307 8602 7984 7441 6961 6534 6152 5810 5502 5.223 4970 47394528 4335 4157 3992 16984 15141 13 591 12278 11158 10 198 9370 8650 8022 7470 6983 6551 6166 5820 5.5105229 4 975 4743 4531 4337 4159 3994 30 17292 15372 13765 12 409 11258 10 274 9427 8694 8055 7496 7003 6.566 6171 5829 5517 5235 4979 4746 4534 433941603995 40 19793 12159 15046 1332 11925 10757 9779 8951 8244 7634 71056642 6233 5.871 5548 5 258 499747604544 437 4166 3999 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Req 5 Req 6A Req 6B Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period years years Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Reg 4 Reg 5 Req 6A Reg 6B Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product A Product B Net present value Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Req 4 Reg 5 Reg 6A Req 6B Calculate the internal rate of return for each product. (Round your answers to 1 decimal place i.e. 0.123 should be cons as 12.3%) Product A Product B Internal rate of return % Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 seg 5 Req 6A Reg 6B Calculate the simple rate of return for each product. (Round your answers to 1 decimal place ie 0.123 should be conside as 12.3%.) Product A Product B Simple rate of return % Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reg 4 Reg 5 RedGA Req 6B For each measure, identify whether Product A or Product B is preferred. Net Present Profitability Payback Internal Rate Simple Rate of Value Index Period of Return Return Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 4 Reqs Req 6A Red B Based on the simple rate of return, Lou Barlow would likely: Accept Product A Accept Product B Reject both products