Derrick Iverson is a divisional manager for Holston Company His annual pay raises are largey 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 require a $3,700,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 16%. The project would provide net operating income each year for five years as follows: Sales Variable expenses Contribution margin Fixed expenses: $3,100,eee 1,300,eee 1,809,889 Advertising, salaries, and other fixed out-of-pocket costs Depreciation s 660,000 740,000 1,489,800 $ 400,0e00 Total fixed expenses Net operating income Click here to view Exhibit 138-1 and Exhibit 138-2. to determine the appropriate discount factorts) 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? 1 7% 8% 9% 10% 11% 12% 14% 0885 0877 13% 15% 16% 17% 18% 19% 20% 1 21% 22% 23% 24% 25% 0.962 0.952 0.943 0935 0.926 0917 0.909 0901 0.893 2 O 925 0.907 0890 0.873 0.857 O.842 O.826 O812 O797 O.783 .769 O.756 O743 O.731 0718 0 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 4 0.855 0823 0.792 0.763 0735 0.708 0.683 0659 0636 0.613 0.592 0.572 0 5 0.822 0.784 0.747 0.713 0681 0.650 0.621 0.593 0 567 0.543 0.51 870 0862 0.855 0.847 0840 0.833 0826 0.820 0.813 0.806 0.800 0.694 0.683 0672 0.661 0650 0.640 0.624 0.609 0.593 0.579 0.564 0.551 0537 0.524 0.512 0.552 0.534 0.516 0.499 0.482 0.467 0451 0437 0423 0410 9 0.497 0476 0456 0437 0419 0.402 0.386 0.370 0.355 0.341 0.328 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.658 0641 6 0.790 0746 0.705 0.666 0.630 0.596 0.564 0535 o507 0.480 0.456 0.432 0410 0.390 0.370 7 0.760 0711 O 665 0 623 O 583 054 7 O 513 O 482 O 452 0.425 O 400 O376 0.354 0.333 0.314 0.296 O 279 0.263 0.249 0235 0.222 0.210 8 0.731 0677 0627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0351 0.327 0.305 0.285 0.266 0.249 0233 0218 0.204 0.191 0.179 9 0.703 0.645 0.592 0.544 0.500 0.460 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 o 10 0.676 0.614 0.558 0.508 0.463 0.422 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 11 0.650 0.585 0.527 0.475 0.429 0.388 0350 03 17 0287 0261 0.237 012 15 O. 195 O. 178 O.162 0148 135 0.123 O.112 0d03 0004 0086 12 0.625 0557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 13 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 0116 0.104 0.093 0084 0.075 0068 0.061 0055 4 0577 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 0099 0088 o078 0.069 0062 15 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 0065 0.057 0.051 0.045 0040 0.035 16 0534 0.458 0394 0.339 0.292 0.252 0.218 0.188 0 163 0.141 0 123 0.107 0093 0081 0071 0062 0.054 0.047 0042 0036 0032 0.028 17 0513 0436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0093 0080 069 0060 0052 0045 0039 0034 0030 18 0.494 0.416 0.350 0.296 o.250 0.212 0.180 0 153 0.130 0.111 0.095 0081 0069 o.059 0051 0044 0038 0.032 0028 0024 0021 0018 0020 0017 0014 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0073 0.061 0051 0043 0.037 0031 0.026 0022 0.019 0016 0014 0012 0031 0026 0:022 0018 0015 0013 0011 0009 0475 0.396 0.331 0.277 0232 0.194 0.164 0.138 0.116 0.098 0083 0070 0060 0051 0043 0037 0.031 0027 20 0.456 0.377 0.312 0.439 0.359 0.294 0.242 0.199 0.164 0.135 0.112 0.093 0077 0064 0053 0044 0.037 0.009 0 22 0.422 0.342 0.278 0.226 0.184 0.150 0123 0.101 0.083o 24 0.390 0.310 0.247 0.197 0.158 0.126 0 102 0.082 0.066 0.053 0043 0.035 0028 0.023 0.019 oo1 0.184 0. 15o 0.123 0.101 0.083 0.068 0.056 0046 0038 0032 0.026 0.022 0018 0.015 0013 0.011 01 0.013 0.010 0.009 0.007 0.006 0005 0.004 0.375 0.295 0.233 0.184 0.146 0.116 0092 0.074 0.059 0.047 0038 0030 0024 o020 0.016 26 0.361 0.281 0. 27 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0060 0.047 0037 0.029 0023 0.018 0014 0.011 0009 o.007 0006 0005 0.004 0.003 0.00 28 0.333 0.255 0.196 0.150 0.116 0090 0069 0054 0042 0033 0026 0020 0.016 0012 0.010 0.008 0.006 0.005 0.004 0003 0002 0002 29 0.321 0.243 0.185 0.141 0.107 0.082 0063 0048 0037 0029 0022 0.017 0014 0011 0.008 0006 0005 0.004 0.003 0002 0.002 0002 0 0.308 0.231 0.174 0.131 o.099 0075 0057 0044 0033 0026 0020 0015 0012 0.009 0007 0005 0.004 0003 0.003 0.002 0.002 000 220 0.172 0.135 0.106 0.084 0066 0.053 0.042 0.033 0.026 0021 0017 0.014 0.011 0009 0,007 0006 0005 0004 0.003 40 0.208 0.142 0.097 0067 0046 0032 0022 0015 0.011 0008 0005 0.004 0.003 o.002 0001 0001 0001 0.000 0000 0000 0000 0000 EXHIBIT 13B-2 Present Velue of an Annulity or $1 In Arears1+ Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 16% 1% 20% 21% 22% 23% 24% 2s 10.962 0952 0.943 0.935 0926 0.917 0.909 0.901 0893 0.885 0.877 0870 0862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1.886 1.859 1833 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 1440 3 2.775 2.723 2.673 2.624 2577 2531 2.487 2.444 2.402 2.361 2.322 2283 2246 2210 2.174 2.140 2.106 2.074 2.042 2011 1.981 1 4 3630 3.546 3465 3.387 3312 3.240 3,170 3.102 3037 2974 2914 2855 2 798 2743 2690 2639 2589 2540 2494 2448 2404 23 4452 4329 4212 4.100 3.993 3890 3.791 3.696 3605 3.517 3433 3352 3274 3.199 3.127 3.058 2.991 2926 2864 2803 2745 2 62 5 6 5.242 5.076 4917 4.767 4623 4.486 4.355 4.231 4.111 3998 3.889 3.784 3685 3589 3.498 3.410 3.326 3245 3.167 3092 3020 2 6.002 5.786 5.582 5389 5.206 5033 4.868 4.712 4564 4423 4.288 4.160 4039 3 922 3.812 3706 3605 3508 3.416 3327 3242 3.161 8 6.733 6.463 6210 5.971 5.747 5.535 5.335 5.146 4968 4799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3619 3.518 9 7.435 7.108 6.802 6.515 6247 5.995 5.759 5.537 5328 5.132 4.946 10 8.111 7.722 7360 7.024 6710 6418 6.145 5.889 5.650 5.426 5.216 5019 4833 4 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3786 3.673 3566 3.463 4659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 4.327 4.177 4.035 3.902 3.776 3.656 53 8358 7.904 7.487 7.103 6.750 6424 6.122 5.842 5583 5.342 5.118 4910 4715 4.533 4.362 4.203 4.053 3912 3780 11.118 10.380 9.712 9.108 8559 8.061 7.606 7.191 6811 6462 6.142 5.847 5575 5.324 5.092 4876 4675 4489 4315 4.153 4001 3859 11 8760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 12 9.385 8.863 8384 7943 5029 4836 4656 4486 4 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6982 6628 6.302 6002 5.724 5.468 5.229 5008 4.802 4611 4432 4265 4.108 15 1 16 11.652 10.838 10.106 9.447 8851 8.313 7824 7.379 6974 6604 6265 5954 5668 5.405 5.162 4938 4730 4536 4357 4.189 40o 17 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6729 6.373 6.047 5749 5.475 5.222 4.990 4.775 4576 4.391 4.219 4059 3910 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 4812 4 608 4419 4.243 4080 3 928 19 13.134 12.085 11.158 10.336 9604 8.950 8.365 7.839 7.366 6938 6.550 6.198 5877 5584 5.316 5.070 4.843 4635 4.442 4.263 4097 3942 20 13.590 12.462 11.470 10.594 9.818 9.129 8514 7963 7469 7.025 6.623 6.259 5.929 5628 5.353 5101 4870 4657 4 460 4279 4110 3954 21 14.029 12.821 11.764 10.836 10017 9.292 8.649 8.075 7.562 7,102 6.687 6.312 5973 5.665 5.384 5.127 4.891 4.675 4476 4.292 4.121 3963 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 6011 5.696 5.410 5.149 4.909 4690 4 488 4.302 4 130 3 970 23 14.857 13.489 12 303 11272 10.371 9.580 8.883 8.266 7718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4311 4.137 3.976 24 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 5.746 5.451 5.182 4937 4713 4 507 4 318 4 143 3981 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 6097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3985 26 15.983 14.375 13003 11.826 10810 9929 9.161 8.488 7.896 7.372 6906 6.491 6.118 5783 5.480 5206 4.956 4728 4.520 4.328 4.151 3988 27 16330 14643 13 211 11.987 10935 10.027 9.237 8.548 7943 7.409 6.935 6514 6.136 5.798 5.492 5215 4.964 4.734 4.524 4.332 4 154 3.990 28 16.663 14.898 13.406 12.137 11051 10.116 9.307 8.602 7.984 7.441 6.961 6534 6 152 5.810 5.502 5223 4.970 4739 4.528 4.335 4.157 3992 29 16.984 15.141 13.591 12.27811 158 10198 937086508022 1470 6983 6551 6166 ssrotsooo.oindua ta wisi 30 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 5517 5235 4979 4.746 4.534 4 339 4 160 3995 40 19.793 17.159 15046 13.332 1 1925 10 757 9779 8.95 t 8244 7634 2106 6642 6hm sso stat tres .oor 'eaae4Mr