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 requiring a $3,000,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 15%. The project would provide net operating income each year for five years as follows: Sales Variable expenses Contribution margin. Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $ 600,000 600,000 $ 2,500,000 1,000,000 1,500,000 Total fixed expenses 1,200,000 Net operating income $ 300,000 Click here to view Exhibit 14B-1 and Exhibit 14B-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. Required 1 Required 2 Required 3A Required 3B Compute the project's net present value. Note: Round your final answer to the nearest whole dollar amount. Net present value Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3A Required 3B Compute the project's simple rate of return. Simple rate of return % < Required 1 Required 3 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3A Required 3B Would the company want Derrick to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3A Required 3B Would Derrick be inclined to pursue this investment opportunity? EXHIBIT 148-1 Present Value of $1; (1+r) Periods 4% 5% 6% 7% 1 0.962 0.952 0.943 0.935 2 0.925 0.907 0.890 3 0.873 0.889 0.864 0.840 0.816 4 5 6 7 8 9. 10 0.855 0.823 0.792 0.763 0.822 0.784 0.747 0.713 0.790 0.746 0.705 0.666 0,760 0.711 0.665 0.623 0,731 0.677 0.627 0.582 0.703 0.645 0.592 0.544 0.676 0.614 0.558 0.508 11 0.650 0.585 0.527 0.475 12 0.625 0.557 0,497 0.444 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 0.032 0.022 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 0.735 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 0410 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 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 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.249 0.235 0.222 0.210 0.540 0.502 0.467 0.434 0,404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 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 0.134 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 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 0.397 0.356 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 h.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 0.108 0.093 0.080 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 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 0.026 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 0.079 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 0.022 0.018 0.015 0.013 0.011 0.009 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 0.010 0.009 0.007 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 0.010 0.008 0.007 0.006 0.005 0.295 0.375 0.233 0.184 0.146 0.116 0.092 0.074 0.047 0.059 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.281 0.361 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 0.096 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 0.255 0.196 0.150 0.116 0.090 0.069 0.033 0.026 0.333 0.054 0.042 0.016 0.020 0.012 0.010 0.008 0.005 0.006 0.004 0.003 0.002 0.002 0321 0.107 0.243 0.185 0.141 0.082 0.063 0.048 0.022 0.037 0.029 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 0.033 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 0.208 0.142 0.097 0.067 0.046 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 0.314 0.296 0.279 0.263 0.000 EXHIBIT 148-2 Present Value of an Annuity of $1 in Arrears: 1 10% 11% 12% 0909 0.901 0.893 1736 1.713 1.690 2.487 2.444 2.402 3.170 3.102 3.037 3.791 3.696 3.605 (1+1) Periods 4% 5% 6% 7% 1 2 3 4 0.962 0.952 0.943 0.935 0.926 1886 1.859 2.775 2.723 2.673 3.630 3.546 3.465 1.833 1.808 1.783 8% 9% 0.917 1.759 5 6 7 6.002 5.766 5.582 5.389 8 6.733 6.463 6.210 5971 9 7435 7.108 10 11 8.760 8.306 12 9.385 8.863 13 7.887 7.499 8.384 7.943 9.986 9.394 8.853 | 8358 14 15 8.559 16 17 18 19 8.950 20 21 22 23 24 25 26 15.622 14.094 12.783 11.654 10.675 9.823 15.983 14.375 13.003 11.826 10.810 9.929 9.161 27 16.330 14.643 13.211 11.907 10.935 10.027 9.237 28 29 30 an 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 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 1.668 1647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1457 1.440 2.624 2.577 2.531 2.361 2.322 2.283 2246 2.210 2.174 2.140 2.106 2.074 2.042 2011 1981 1.962 3.387 3.312 3.240 2.974 2.914 2.855 2.798 2,743 2.600 2639 2.589 2.540 2.494 2.448 2.404 2,362 4.452 4.329 4.212 4.100 3.993 3.890 3517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5242 5.076 4.917 4.767 4623 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 2.961 5.206 5033 4.868 4.712 4564 4.423 4.288 4.160 4.039 3922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 5.747 5.535 5335 5.146 4.968 4799 4.639 4487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 6802 6515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4772 4607 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 6418 6.145 5.889 5.650 5.426 5.216 5.019 4833 4.659 4494 4.339 4.192 4.054 3.923 3.799 3.682 3571 7.139 6805 6495 6.207 5938 5.687 5453 5.234 5.029 4.836 4.656 4.486 4.327 4177 4.035 3.902 3.776 3.656 7.536 7.161 6.814 6.492 6.194 5918 5.660 5.421 5.197 4968 4.793 4.611 4439 4.278 4.127 3.985 3.851 3.725 7.904 7487 7.103 6.750 6.424 6.122 5842 5.583 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 7.766 7367 6.982 6.628 6.302 6002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4108 3.962 3824 1118 10.300 9,712 9.108 8.061 7.606 7.191 6811 6.462 6.142 5.847 5.575 5.324 5.092 4876 4.675 4489 4.315 4.153 4.001 3.859 11.652 10.838 10.106 9.447 8.851 8.313 7824 7.379 6.974 6604 6.265 5.954 5668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6047 5,749 5.475 5222 4.990 4.775 4.576 4.391 4219 4.059 3910 12.659 11.690 10.828 10.059 9.372 8756 8201 7,702 7.250 6.840 6.467 6.128 5818 5.534 5273 5.033 4.812 4,608 4419 4.243 4.080 3.928 13.134 12.085 11.158 10.336 9.604 8.365 7.839 7.366 6.938 6550 6.198 5877 5.584 5316 5070 4.843 4635 4.442 4.263 4.097 3.942 13.590 12.462 11.470 10.594 5.818 9.129 8514 7.963 7.469 7.025 6623 6.259 5.929 5.628 5.353 5.101 4.870 4657 4.460 4.279 4.110 | 3954 14.029 12.821 11.764 10.836 10.017 9.292 8649 8.075 7562 7.102 6.687 6312 5973 5.665 5.384 5127 4891 4.675 4.476 4.292 4.121 3.963 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7645 7.170 6743 6359 6011 5.696 5.410 5.149 4.909 4.690 4488 4.302 4.130 3970 14.857 13.409 12.303 11.272 10.371 9.580 8883 8.266 7.718 7.230 6.792 6.399 6044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 15.247 13.799 12.550 11.469 10.529 9.707 8985 8.348 7.784 7.283 6.835 6434 6.073 5.746 5.451 5.182 4937 4713 4.507 4318 4.143 3.961 9.077 8.422 7843 7330 6.873 6454 6.097 5.766 5.467 5.195 4.948 4721 4514 4323 4.147 3.985 848 7.896 7.372 6.906 6491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 8548 7.943 7400 6535 5.798 5.492 5215 4964 4.734 4524 4.332 4.154 3990 1663 14.895 13406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6534 6152 5810 5.502 5.223 4970 4739 4528 4335 4157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9370 8650 8.022 7.470 6983 65516.166 5820 5510 5.229 4975 4.743 4.531 4.337 4.159 1994 17.292 15372 13765 12.409 11.258 10.274 9427 8694 8055 7496 7.003 6566 6177 5829 5517 5235 4979 4746 4.534 439 4.160 3995 6514 6.136