Chapter 13 Q 2

Chapter 13 Homework problems i Saved Help Save & Exit S Check my w 2 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 23% each of the last three years. Casey is considering a capital budgeting project that would require a $4,000,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: points Skipped Sales $3,900,000 variable expenses 1, 800,000 Contribution margin 2, 100,000 Fixed expenses: Advertising, salaries, and other Book fixed out-of-pocket costs $750, 000 Depreciation 800, 000 Total fixed expenses 1,550,000 Print Net operating income 550,000 n References Click here to view Exhibit 138-1 and Exhibit 13B-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 Req 3 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 \fEXHIBIT 13B-2 Present Value of an Annuity of $1 in Arrears; 7 1- 71 + 1,"] Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% UI AWN - 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 1.886 1.859 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 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2.775 2.723 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 2.042 2.011 1.981 1.952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 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 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 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 3.242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 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 3.923 3.799 3.682 3.571 11 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 12 9.385 8.863 8.384 7.943 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 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 14 10.563 9.899 9.295 6 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 15 11.118 10.380 9.712 9.108 8.559 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 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 17 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 18 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 19 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 22 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 23 14.857 13.489 12.303 11.272 10.371 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 4.499 4.311 4.137 3.976 24 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 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 4.151 3.988 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 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 3.990 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9.779 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 3.999Req 1 Req 2 Req 3 Req 4A Req 48 What is the project's internal rate of return? (Round your answer to the nearest whole percentage, i.c. 0.123 should be considered as 12%.) nternal rate of return % Req 1 Req 2 Req 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 % 20 Req 1 Req 2 Req 3 Req 4A Req 4B Would the company want Casey to pursue this investment opportunity? Yes No 20 Req 1 Req 2 Reg 3 Req 4A Req 4B Would Casey be inclined to pursue this investment opportunity? Yes No 20