Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his divisions return on investment (ROI), which has been above 25% each of the last three years. Derrick is considering a capital budgeting project that would require a $5,170,000 investment in equipment with a useful life of five years and no salvage value. Holston Companys discount rate is 19%. The project would provide net operating income each year for five years as follows:

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? Yes or No

3b. Would Derrick be inclined to pursue this investment opportunity? Yes or No