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 25% each of the last three years. Derrick is considering a capital budgeting project that would require a $4,700,000 investment in equipment with a useful life of five years and no salvage value. Holston Company?s discount rate is 19%. The project would provide net operating income each year for five years as follows:

Sales		$	4,100,000
Variable expenses			1,800,000
Contribution margin			2,300,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$735,000
Depreciation	735,000
Total fixed expenses			1,470,000
Net operating income		$	830,000

Attached areExhibit 13B-1andExhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1.	Compute the project's net present value.(Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest dollar amount.)

2.	Compute the project's simple rate of return.(Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.)

3-a.	Would the company want Derrick to pursue this investment opportunity?
	Yes No

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