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 $3,050,000 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: $2.6eeeee 1.ese.ee 1,550,00 Sales Variable expenses Contribution margin Fixed expenses: Advertising. salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 600, eee 1.210.ee 340.00 Click here to view Exhibit 138.1 and Exhibit 13B-2. to determine the appropriate discount factor(s) using tables. net pro 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? ompany wants to pursue this invest opportunity? Complete this question by entering your answers in the tabs below. Req1 Reg 3A Reg 36 Raq 3A Roq 38 Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Net present value Reg 2 > 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 $3,050,000 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: $2,600,000 1,050, eee 1,550, eee Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 600,000 610,000 Click here to view Exhibit 138.1 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. 934 Req1 Red 2 Reg 3B 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%) Simple rate of return EXHIBIT 130-1 Present Value of $t Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 O 885 0877 0370 0362 0855 0.847 0 840 0.833 0.826 0820 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 0783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0672 0.661 0.650 0.640 0.889 0.854 0 840 0.816 0.794 0.772 0.751 0731 0.712 0.693 0675 0 558 0641 0624 0.609 0.593 0.579 0.564 0551 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 0572 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 0681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.385 0.370 0.355 0.341 0.328 6 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 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0482 0.452 0.425 0.400 0.376 0354 0333 0.314 0 296 0.279 0.263 0249 0235 0.222 0.210 0.731 0.677 0.627 0.582 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 9 0.703 0.645 0.592 0 544 0.500 0.460 0.424 0.391 0.31 0.33 0.308 0.284 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 0.422 0 386 0 352 0322 0 295 0 270 0247 0 227 0208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 13 0.650 0.585 0.527 0.475 0429 0.388 0 350 0317 0 287 0 261 0237 0215 0.195 0.178 0.162 0.14 0.135 0.123 0.112 0.103 0.094 0.085 0625 0.557 0.497 0 444 0 397 0.356 0319 0286 0257 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 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.250 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.051 0.055 0.577 0.505 0.442 0.38B 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 0.035 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 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 0218 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 0371 0317 0.270 0 231 0.1950.170 0.146 0.125 0.10B 0.093 0.080 0.069 0.060 0.052 0045 0.039 0.034 0.030 0026 0.023 0.494 0416 0.350 0296 0.250 0212 O 180 0.153 0.130 0.111 0095 0.081 006 0059 0.051 0044 0.038 0.032 0028 0024 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 0312 0.250 0.215 0.178 0.149 0.124 0.104 0.087 0073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0016 0.014 0.012 17 18 22 23 24 25 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 0.14 0.150 0.123 0.101 0.083 0.068 0056 0.046 0.038 0032 0.025 0.022 0.018 0.015 0.013 0.01 0.009 0.007 0.406 0.326 0 262 0.211 0.170 0.138 0 112 0.091 0.074 0.060 0049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0010 0.000 0.007 0.006 0 390 0.310 0247 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 0010 0009 0.007 0.006 0.005 0.004 260.361 0.281 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 0.000 0.007 0.006 0.005 0.004 0.003 27 0.347 0.268 0207 0.161 0.125 0000 0076 0060 0.047 0.037 0029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 28 0.333 0255 0 196 0.150 0.116 0090 0 069 0.054 0.042 0.033 0.026 0.020 0.016 0012 0010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 29 0.321 0.243 0.185 0.141 0.107 0.002 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 30 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.025 0.020 0.015 0.012 0.000 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 40 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 13-2 Present Value of an Annuity of $1 in Arrears:f/1- o' Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 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 1.886 1859 1833 1.308 1.783 1.759 1.735 1.713 1.690 1668 16:47 1626 1.605 1.585 1.566 1547 1.528 1.509 1.492 1.474 1457 1.440 2.775 2.723 2673 2624 2577 2531 2 487 2444 2.402 2361 2222 223 2246 2210 2.174 2.140 2.106 2074 2042 2011 1.981 1.952 4 3630 3.546 3.465 3.387 3312 3.240 3.170 3 102 3037 2 974 2 914 2855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 5 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3 696 3.605 3. 517 3433 3352 3.274 3.199 3.127 3.058 2.991 2.926 2 864 2.803 2.745 2.689 6 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 2.951 7 6.002 5.786 5.582 5.389 5.206 5,033 4.868 4.712 4.564 4.423 4288 4160 4 039 3.922 3812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 8 6.733 6.463 6.210 5.971 5.747 5.535 5335 5. 146 4 968 4.799 4.630 4.487 4 344 4 207 4078 3 954 3.837 3.726 3.619 3.518 3.421 3.329 9 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 4.031 3.905 3.786 3.673 3.566 3.463 10 8.111 7.722 7.360 7.024 6.710 6.40 6.145 5 889 5.650 5.426 5216 5019 4833 4659 4.494 4339 4.192 4054 3923 2 799 3682 3571 12 13 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5,938 5.687 5.453 5 234 5.029 4.836 4.656 4.486 4.327 4.177 4,035 3.902 3.776 3.656 9.385 8863 8.384 7.943 7.536 7.161 6814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5 842 5583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4 053 3.912 3.780 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6,628 6.302 6002 5724 5.468 5.229 5.000 4 RO2 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8.061 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 14 15 16 17 18 19 20 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 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 5.222 4.990 4.775 4.576 4.391 4219 4.059 3.910 12659 11.690 10.828 10.0599372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4243 4.080 3.928 13.134 12085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4263 4097 3942 13.590 12462 11.470 10.594 9818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4 279 4.110 3.954 21 22 23 24 25 26 27 28 29 30 40 14.029 12 821 11.764 10.836 10.017 9.292 8.649 8075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 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 7.645 7.170 6.743 6.359 6.011 5,696 5,410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6,044 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 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 15.622 14 094 12.783 11.654 10,675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.983 14 375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 15 220 14 643 13 211 11.987 10935 10 027 9.237 8548 7943 7.409 6 935 6514 6136 5 798 5.492 5215 4964 4.734 4.524 4322 4.154 3.990 15.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8650 3.022 7.470 6.983 6551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6,566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999