Check my work Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on Investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,300,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 17%. The project would provide net operating income each year for five years as follows: $2,900,000 1,200,000 1,700,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 640,000 660,000 1,300,000 $ 400,000 Click here to view Exhibit 138-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return 3a. Would the company want Derrick to pursue this investment opportunity? 3b. Would Derrick be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3A Reg 38 13 Exercises Saved HelpS 1,200,000 1,700,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 640,000 660,000 1,300,000 $ 400,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. ences Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return 3a. Would the company want Derrick to pursue this investment opportunity? 3b. Would Derrick be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg Reg 38 Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Net present value Req2 > 1,200,000 1,700,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 640,000 660,000 1,300,000 $ 400,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return. 3a. Would the company want Derrick to pursue this investment opportunity? 3b. Would Derrick be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Req Reg 3A Req 3B oute the project's simple rate of return. (Round your answer to 1 decimal place le. 0.123 should be considered as 12.3%.) Simple rate of return ( Reg 1 RegSA > VIDU A L Chapter 13 Exercises exhibit30.1.jpg EXHIBIT 13B-1 Present Value of St . Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 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 2 0.925 0.907 0.890 0.873 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 3 0.889 0.864 0.840 0.816 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 4 0.855 0.823 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 0.482 0.467 0.451 0.437 0.423 0.410 5 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 7 8 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.750 0.711 0.665 0.623 0.583 0.547 0513 0.482 0.452 0.425 0.400 0.375 0.354 0 333 0314 0.296 0.279 0.263 0249 0.235 0.222 0210 0.731 0677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0327 0.305 0.285 0.266 0.249 0.233 0.218 0 204 0.191 0.179 0.168 .703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0 361 0.333 0 308 0284 0 263 0.243 0225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 422 0.386 0.352 0.322 0.295 0.270 0247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 9 0 11 12 13 0.650 0.585 0.527 0.475 0.429 0.388 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 0.356 0.319 0.286 0.25% 0.231 0.20 0.187 0.168 0.152 0.137 0124 0.112 0.102 0092 0083 0076 0.069 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0229 0.204 0.192 0.16 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 0232 0 205 0.181 0.160 0.141 0.125 0.11 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 0084 0.074 0.065 0,057 0.051 0.045 0.040 0.035 15 16 17 18 19 20 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 0317 0.270 0.231 0 198 0.170 0.146 0.125 0.108 0093 0.00 0.009 0.060 0052 0.045 0.039 0034 0030 0.026 0.023 0.494 0.416 0.350 0295 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 0.021 0.018 0.475 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 0.027 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 0.025 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 0.018 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 0022 0.01 0.015 0013 0011 0.000 0.007 0.406 0.326 0.262 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 0010 0.00 0007 0.006 0.390 0.310 0.247 0.197 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 0010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 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 0005 0.004 21 22 23 24 25 26 27 28 29 30 40 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0026 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 0018 0.014 0.011 0.000 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 0016 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 0.000 0.075 0.057 0.044 0.033 0.026 0.020 0,015 0,012 0.000 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 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 EXHIBIT 133-2 Present Value of an Annuity of $1 in Area: 11- Periods 1 2 3 4 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.95 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1886 1859 1833 1808 1.783 1.759 1736 1.713 1690 1668 1647 1626 1605 1.585 1.566 1547 1.528 1.509 1.492 1.474 1.457 1.440 2.775 2.723 2673 2624 2577 2.531 2487 2444 2.402 2361 2322 2283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2011 1.981 1952 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 2639 2589 2540 2.494 2.448 2.404 2362 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 3058 2.991 2.926 2.864 2.803 2.745 2 689 5.2425.076 4917 4.767 4.623 4.486 4355 4231 4.111 3.998 3.889 3784 3685 3.589 3.498 3.410 3.326 3245 3.167 3.092 3.020 2951 6.002 5.786 5.582 5.389 5.206 5.033 4868 4712 4.564 4.423 4288 4160 4039 3.922 3.812 2.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 6.463 6210 5.971 5.747 5.535 5335 5.146 4.968 4.799 4639 4487 4 344 4.207 4.078 3.954 3.837 3.726 3.619 3518 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 4031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7360 7.024 6.710 6.418 6145 5 889 5.650 5.426 5216 5019 4833 4.659 4494 4.339 4.192 4.054 3.923 3.799 3.682 3571 11 12 13 14 15 16 17 18 19 20 8.750 8.306 7887 7.499 71396 805 6 495 6 207 59185 687 5453 5234 5029 4836 4656 4 486 4327 4177 4035 3.902 3.776 3656 93858.863 8 384 7943 7536 7.161 6814 6 492 6 194 5 918 5.660 5421 5 1974 988 4793 4 611 4.439 4278 4.127 3.985 3851 3725 99869.394 853 8 358 7904 7487 7103 6.750 6.424 6.122 5.342 5583 5 342 5.118 4.910 4715 4.533 4 362 4. 203 4.053 3.912 3.780 10.563 9.899 9.295 8.745 8.244 77867367 602 6628 6.302 6002 5224 5468 5229 5 008 4 802 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8061 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 11652 10.838 10.106 9.447 8.851 8.313 7824 7.379 6974 6 604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4357 4.189 4033 3.887 12 166 11 274 10.477 9.763 9.122 8.544 8022 7.549 7.120 6.729 6.373 6047 5.749 5.475 5222 4.990 4.775 4576 4.391 4219 4059 3.910 12659 11.690 10828 10.059 9.372 8.7568.201 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 4080 3.928 13.134 12.085 11.158 10.336 9.604 8.950 8365 7839 7366 6.938 6.550 6.198 5877 5584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 13.590 12.462 11.470 10.594 9818 9.129 8514 7.963 7.469 7 025 6.623 6.259 5 929 5.628 5 353 5 101 4870 4657 4.460 4279 4.110 3.954 22 14029 12 821 11.764 10836 10 017 9.292 8649 8075 7562 7.102 6 687 6312 5973 5665 5384 5 127 4 891 4675 4 476 4 292 4.121 3963 14.451 13.163 12.042 11.061 10 201 9.442 87728.176 7645 7:170 6743 6.359 6011 5 606 5410 5149 4.909 4690 4.488 4 302 4.130 3970 14857 13.489 12 303 11 272 10.371 9580 888 8 266 7718 7.230 6.792 6.399 6.044 5.223 5432 5 167 4.925 4.703 4.499 4311 4.137 3.976 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7784 7.283 6.835 6.434 6,073 5746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3981 15 622 14.094 12.783 11,654 10.675 98239.077 8.422 7.843 7330 6.873 6.464 6.097 5.766 5.467 5.195 4 948 4721 4514 4 323 4.147 3.985 25 26 27 2 29 30 15 983 14.375 13 003 11.826 10 810 99299 161 8.489 7896 7.372 6 906 6.491 6 118 5 783 5 480 5 205 4 956 472 4520 472 4151 3988 16 33014 643 13 211 11.987 10935 10027 9 237 81548 7.943 7.409 6 935 6.514 6.136 5 798 5.492 5 215 4 964 474 4.524 4222 4.154 3.990 16.663 14.898 13.406 12.137 11051 10.116 9.307 8 602 7.084 7.441 6.951 6534 6.152 5.810 5.502 5223 4970 4.739 4.528 4.335 4.157 3 992 16.984 15.141 13.591 12 278 11.158 10.1989 370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5229 4 975 4.743 4.531 4337 4.159 3.994 17.292 15.372 13.765 12 409 11.258 10 274 9 427 8.694 8055 7.496 7.003 6.566 6. 177 5.829 5.517 5235 4.979 4.746 4534 4339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4997 4.760 4544 4347 4.166 3.999