Check my work 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 $5,850,000 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: Sales Variable expenses Contribution margin pocket costs $ 5,200,000 2,320,000 2,880,000 7 Fixed expenses: Advertising, salaries, and other fixed out-of- Depreciation. $ 880,000 1,170,000 Total fixed expenses Net operating income 2,050,000 $830,000 Click here to view Exhibit 14B-1 and Exhibit 148-2, 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 48 What is the project's net present value? (Round your final answer to the nearest whole dollar amount.) Net present value Req 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.e. 0.123 should be considered as 12%.) Internal rate of return % Complete this question by entering your answers in the tabs below. Req 1 Req 2 Red 3 Req 4A Req 48 What is the project's simple rate of return? (Round your answer to 1 decimal place.) Simple rate of return % Req 1 Req 2 Req 3 Req 4A Req 4B Would the company want Casey to pursue this investment opportunity? Yes No Req 1 Req 21 Req 3 Req 4A Req 4B Would Casey be inclined to pursue this investment opportunity? Yes ONO < Req 4A EXHIBIT 14B-1 Present Value of $1; 1 ((1+r))" Periods 4% 5% I 2 0.925 0.907 3 0.889 0.864 7% 0.962 0.952 0.943 0.935 0.890 0.873 0.840 0.816 6% 4 0.855 0.823 5 0.822 0.784 6 0.790 0.746 7 0.760 0.711 8 0.731 0.677 0.627 0.582 0.540 0.502 9 0.703 0.645 0.592 0544 10 0.676 0.614 0.558 0.508 0.463 0.500 0.460 0.422 11 0.650 0.585 0.527 0.475 0,429 0.388 12 0.356 13 14 15 16 17 18 19 20 21 22 23 0.406 0.326 0.262 24 0.390 0.310 0,247 0.197 25 0.375 0.295 0.233 26 27 28 29 30 0.033 40 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 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 0.857 0.842 0.826 0.812 0.797 0.783 0,769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0482 0467 0451 0.437 0423 0.410 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0476 0456 0437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0480 0.456 0.432 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.179 0.168 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176: 0.162 0.149 0.137 0.126 0.116 0.107 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0.625 0.557 0.497 0.444 0.397 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124) 0.112 0.102 0.092 0.083 0.076 0.069 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0021 0.018 0475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0027 0.023 0.020 0.017 0.014 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.439 0.359 0.294 0.242 0.199 0.164 0.135 0.112 0.093 0.077 0,064 0.053 0.044 0.037 0.031 0.026 0.022 0.0181 0.015 0.013 0.011 0.009 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.007 0.006 0.005 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.361 0.281 0.220 0.172 0.135 0.106- 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.333 0.255 0.196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 0.243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0,262 0.314 0.296 0.279 0.263 0.249 0.235 0.266 0.249 0.233 0.218 0.204 0.191 0.222 0.210 0.108 0.093 0.080 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; -+] Periods 4% 5% 6% 1 0.962 0.952 0.943 2 1.886 3 2.775 1.859 1.833 2.723 2.673 4 3.630 3.546 3.465 5 4452 4.329 4.212 7% 0.935 1808 2.624 3.387 4.100 10% 8% 9% 0.926 0.917 0.909 0.901 0.893 1.736 1.783 1.713 1.759 2.577 2.531 2487 2.444 2.402 3.312 3.240 3.170 3.102 3.037 3.993 3.890 3.791 11% 12% 13% 14% 0.885 0.877 1.690 1668 1.647 3.696 3.605 6 5.242 5076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 7 6.002 5.786 5582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 8 6.733 6463 6.210 5.971 5.747 5.535 9 7.435 7.108 6.802 6.515 10 11 12 13 14 7.786 15 11.118 10.380 9.712 9.108 8.559 16 11.652 10.838 10.106 9447 8.851 17 12.166 11.274 10.477 9.763 9.122 18 12.659 11.690 10.828 10.059 9.372 19 13.134 12.085 11.158 10.336 9.604 20 13.590 12.462 11.470 10.594 9.818 9.129 8.950 8.365 8.514 21 22 8.772 23 24 25 26 27 28 29 8.650 30. 40 20% 19% 18% 17% 0.855 0.847 0.840 0.833 0.870 0.862 1547 1.528 1.626 1.605 1.585 1.566 2.361 2.174 2.140 2.106 2.322 2.283 2.246 2.210 2.540 2.494 2.448 2.404 2.362 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.689 2.864 2.803 2.745 3.058 2.991 2.926 3.352 3.274 3.199 3.127 3517 3433 3.245 3.092 3.020 2.951 3.685 3.589 3.498 3.410 3.326 3.889 3.784 3.605 3.508 4.160 4.039 4.288 3.922 3.812 3.706 3.837 3.726 3.619 4.799 4.639 4.487 5.335 5.146 4.968 4.344 4.207 4.078 3.954 4.772 4.451 4.031 4.607 4.303 4.163 3.905 3.786 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.659 4.494 4.339 4.192 4.054 3.923 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 3.902 3.776 3.656 4.836 4.656 4.486 4.327 4.177 4.035 8.760 5.938 5.687 5.453 5.234 5.029 8.306 6.805 7.887 7.499 7.139 6.495 6.207 5.197 6.194 5.918 5.660 5421 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6492 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 9.986 9394 8853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.802 4.611 4.432 4.265 4.108 3.962 3.824 10.563 9.899 9.295 8.745 8.244 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.675 3.859 4.489 4.315 4.153 4001 5847 5.575 5.324 5.092 4876 6.811 7.606 7.191 6.462 6.142 8.061 5405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 6.974 6.604 6.265 5.954 5.668 8.313 7.824 7.379 4.775 4576 4.391 4.219 4.059 3.910 8544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5475 5.222 4.990 5.033 4.243 6467 7.702 7.250 6.840 4.080 3.928 6.128 5818 5.534 5.273 4.812 4.608 4.419 8.756 8.201 5.877 5.584 5316 5.070 4.843 4,635 6.550 6.198 4.442 4.263 4.097 3.942 7.839 7.366 6.938 4.870 4.657 4.460 4.279 4.110 3.954 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.891 6.312 5.973 5.665 5.384 5.127 4.675 4.476 4.292 8.075 7.562 7.102 4.121 3.963 6.687 14.029 12.821 11.764 10.836 10.017 9.292 8.649 6.011 4.690 4.488 5.696 5410 5.149 4.909 4.302 4.130 14.451 13.163 12.042 11.061 10.201 9.442 8.176 7.645 7.170 6.743 6.359 4.499 4.311 4.137 6.792 6.399 8.266 7.718 7.230 6.044 5.723 5432 5.167 4.925 4.703 8.883 14.857 13.489 12.303 11.272 10.371 9.580 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 8.348 7.784 7.283 8.985 15.247 13.799 12.550 11.469 10.529 9.707 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 9.161 8.488 7.896 7.372 6.906 6.491 15.983 14.375 13.003 11.826 10.810 9.929 4.964 4.734 6.935 6.514 6.136 5.798 5492 5.215 4.524 3.990 4.332 4.154 8.548 7.943 7.409 16.330 14.643 13.211 11.987 10.935 10.027 9.237 4.970 4.739 4.528 6.534 6.152 5.810 5.502 5.223 3.992 4.335 4.157 8.602 7.984 7.441 6.961 16.663 14.898 13.406 12.137 11.051 10.116 9.307 4337 4.159 3.994 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 16.984 15.141 13.591 12.278 11.158 10.198 9.370 3.995 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 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 15% 16% 21% 23% 22% 0.820 0.826 1.492 1509 1474 2.074 2.042 2011 24% 25% 0.813 0.806 0.800 1457 1.440 1.981 1.952 3.167 3416 3.327 3.242 3.161 3.518 3421 3.329 3.673 3.566 3.463 3.799 3.682 3.571 3.970 3.976 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999