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 $4,140,000 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 Pixed expenses $3,400,000 1,450,000 1,950,000 Advertising, salaries, and other fixed out-of-pocket costs Depreciation s 670,000 Total fixed expenses Net operating income 828,000 S 1,498 000 452,000 Click here to view Exhibit 12B.1 and Exhibit 12B-2, to determine the appropriate discount factors) using tables Required s 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 Req 1 Req 2 Req 3A Req 38 Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Req 2 ) Prev 4 of 4 Next AZ, tO dEtermine the appropriate discount f 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. Req 1 Req 2 Req 3A Req 3B Compute the project's simple rate of return. (Round your answer to 1 decimal place ie. 0.123 si 12.3%.) imple rate of return Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tab 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. Req 3A Req 1 Would the company want Derrick to pursue this investment opportunity? OYes ONo Req 2 Req 38 Req 2 Req 3B> Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tabl Required: . 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. Req 1 Req 2 Req 3A Req 38 Would Derrick be inclined to pursue this investment opportunity? K Req 3A
