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 $3,300,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 17%. The project would provide net operating income each year for five years as follows: $2,900,000 1,200,000 1,700,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 640,000 660,000 1,300,000 $ 400,000 Click here to view Exhibit 12B-1 and Exhibit 12B-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? 220 Periods 4% 5% 6% 7% 8% 9% 10% 11% 2% | 13% 14% 15% 16% 7% 18% 19% 20% 21% 23% 24% 25% 1 0.962 0952 0943 0935 0926 0.917 0909 0.901 0.893 0.885 0.87 0870 0.862 0.855 0847 0840 0833 0826 0.820 0.83 0.806 0.800 0925 0907 0890 0873 0857 0842 0826 082 0.797 0783 0769 0.756 0743 0731 0718 0.706 0694 0683 0672 0661 0650 0640 3 0889 0864 0.840 0816 0794 072 0751 0731 072 0693 0675 0658 0641 0624 0609 0593 0579 0564 0551 0537 0524 0512 4 0.855 0823 0.792 0763 0735 0708 0683 0659 0636 0613 0592 052 0552 0534 056 0499 0482 0467 0.451 0437 0.423 0410 5 0.822 0.784 0.747 0713 0681 0.650 0621 0.593 0.567 0543 0.519 0497 0.476 0.456 0437 0.419 0.402 0.386 0.370 0.355 0.341 0328 6 0.790 0746 0705 0666 0630 0596 0564 0535 0507 0480 0456 0432 0410 0.390 0370 0.352 0335 0.319 0303 0289 0275 0262 7 0.760 071 0665 0623 0583 0547 0513 0482 0452 0425 0400 0.376 0354 0333 0314 0.296 0279 0263 0.249 0235 0.222 0.210 8 0731 0.67 0.627 0582 0.540 0.502 0.467 0434 0.404 0.376 0.351 0327 0.305 0285 0266 0.249 0233 0.218 0204 0191 0.179 0.168 9 0703 0645 0592 0544 0500 0460 0424 0391 0.361 0333 0.308 0284 0263 0243 0225 0209 0194 0180 0167 0155 0144 0134 10 0.676 0614 0558 0.508 0463 0.422 0386 0.352 0322 0295 0270 0247 0227 0208 0191 076 0162 0149 0 0126 016 0107 11 0.650 0.585 0.527 0475 0.429 0.388 0.350 0.37 0.287 0261 0.237 0.215 0195 078 0162 0.148 0.135 0123 0112 0.103 0.094 0.086 12 0.625 0557 0497 0444 0397 0.356 0319 0286 0.257 0231 0.208 0.187 0.168 0152 037 0124 012 0102 0.092 0083 0076 0069 0601 0530 0469 0415 0368 0.326 0290 0258 0229 0204 0182 0.163 0145 0130 0116 004 0093 0084 0075 0068 0061 0055 14 0570505 0442 0388 0340 0299 0263 0232 0205 0181 0160 0141 025 0111 0099 0088 0078 0069 0.062 0055 0049 0044 15 0555 0.481 0417 0362 0315 0275 0239 0209 0.183 0160 0140 0123 0108 0.095 0084 0074 0065 0.057 0.051 0045 0.040 0035 16 0534 0458 0394 0339 0292 0252 0218 0188 0.163 0141 0123 0107 0093 0.081 0071 0.062 0054 0047 0042 0036 0032 0028 17 0513 0436 0371 0317 0270 0231 0198 0170 0.146 0125 0108 0093 0080 0069 0060 0052 0045 0039 0034 0030 0026 0023 18 0.494 0416 0350 0.296 0250 0.212 0180 0153 0.130 0111 0095 0081 0069 0059 0051 0.044 0038 0032 0.028 0024 0.021 0018 19 0475 0.396 0331 0.27 0232 0194 0.164 0.138 016 0098 0.083 0.070 0.060 0.051 0043 0.037 0031 0027 0023 0020 0.07 0.014 20 0456 0.37 0.312 0258 0.215 0.178 0.149 0124 0.104 0087 0.073 0.061 0.051 0.043 0.037 0.031 0026 0.022 0.019 0.016 0.014 0.012 21 0.439 0359 0.294 0.242 0199 0164 0135 0.112 0.093 0.07 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.03 0.01 0.009 22 0.422 0.342 0.278 0.226 0.184 0150 0.123 0101 0.083 0.068 0.056 0.046 0.038 0.032 0026 0.022 0.018 0.015 0.013 0.01 0.009 0.007 23 0.406 0326 0262 0211 0170 0138 012 0.091 0.074 0060 0.049 0040 0033 0.027 0022 0.018 005 0.012 0010 0009 0007 0006 24 0.390 0310 0.247 0197 0158 0126 0102 0082 0.066 0053 0043 0035 0028 0.023 009 0.05 0.013 0010 0.008 0007 0006 0.005 25 0375 0295 0233 0184 0146 0116 0092 0074 0059 0047 0038 0030 0024 0020 0016 0013 0010 0009 0007 0006 0005 0004 26 0.361 0281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0042 0.033 0.026 0.021 0.07 0014 0.011 0009 0007 0.006 0.005 0.004 0.003 27 0347 0268 0207 0161 0125 0098 0076 0060 0.047 0037 0029 0023 0018 0014 001 0009 0007 0006 0005 0004 0003 0002 28 0333 0255 0196 0150 016 0090 0069 0054 0.042 0033 0026 0020 0016 0012 0010 0.008 0.006 0005 0004 0003 0002 0.002 29 0321 0243 0185 0141 0107 0.082 0063 0048 0037 0029 0022 0017 004 0011 0008 0.006 0005 0004 0.003 0002 0.002 0002 30 0.308 0.231 0.174 0131 0.099 0075 0.057 0044 0.033 0026 0.020 0.015 0.01 0.009 0.007 0.005 0004 0.003 0.003 0.002 0002 0.001 40 0.208 0142 0.097 0.067 0046 0032 0022 0015 0.01 0008 0005 0004 0003 0.002 0001 0001 0001 0000 0.000 0.000 0.000 0.000 . Periods 4% 5% 6% 7% 8% 9% 10% 11% 2% 13% 14% 5% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0962 0952 0943 0935 0926 0917 0909 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 0826 0820 0813 0806 0800 2 1.886 1859 1833 1808 1.783 1759 1736 1713 1.690 1668 1.647 1626 1605 1585 1566 1.547 1528 1.509 1492 1.474 1.457 1440 3 25 2.723 2.673 2.624 257 2531 2487 2.444 2.402 2361 2322 2283 2.246 2.210 2174 2.140 2.106 2074 2.042 2011 1981 1952 4 3.630 3.546 3.465 3.38] 3.312 3.240 3170 3102 3.037 2.974 2.914 2.855 2798 2743 2690 2639 2.589 2540 2.494 2448 2.404 2.362 5 4.452 4.329 4.212 4.100 3993 3.890 3791 3.696 3,605 3517 3.433 3352 3.274 3199 3127 3.058 2,991 2926 2864 2803 2745 2.689 6 5242 5076 4917 4.767 4.623 4486 4.355 4.231 4.11 3998 3.889 3784 3685 3589 3498 3410 3326 3245 3167 3092 3020 2.951 7 6002 5.786 5.582 5389 5.206 5.033 4868 4.72 4.564 4.423 4.288 4.160 4.039 3922 3.812 3706 3605 3.508 3416 3327 3242 3161 8 6.733 6.463 6.210 5.971 5.747 5.535 5335 5.146 4.968 4799 4639 4487 4.344 4.207 4078 3954 3837 3726 3619 3.51 3421 3329 9 7.435 7108 6.802 6.515 6.247 5.995 5759 5.537 5.328 5132 4.946 4.772 4.607 4451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 10 8.111 7722 7.360 7024 6710 6.418 6.145 5.889 5.650 5426 5.216 5.019 4833 4.659 4494 4.339 4192 4.054 3.923 3799 3.682 3.571 11 8.760 8.306 7887 7499 7139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4177 4.035 3902 3776 3.656 12 9385 8863 8.384 7943 7536 7161 6.814 6492 6194 5.918 5.660 5421 5.197 4.988 4.793 4611 4439 4.278 4.127 3.985 3851 3725 13 9986 9394 8853 8.358 7904 7.487 7103 6.750 6424 6122 5.842 5.583 5342 518 4.910 4.75 4533 4.362 4.203 4.053 3.912 3780 14 10.563 9.899 9295 8.745 8.244 7786 7367 6982 6628 6.302 6.002 5.724 5468 5.229 5.008 4.802 4611 4.432 4.265 4.108 3962 3.824 11.118 10.380 9712 9108 8559 8061 7606 7191 6.81 6.462 6.142 5.847 5575 5.324 5.092 4.876 4675 4.489 4.315 4.153 4.001 3.859 6 11.652 10.838 10 106 9.447 8.851 8.313 7824 1379 6974 6.604 6.265 5954 5668 5.405 5.162 4.938 4.730 4.536 4.357 4189 4033 3887 7 12.166 1.274 10.47 9763 9.122 8.54 8.022 7549 7120 6.729 6.373 6.047 5.749 5.45 5.222 4.990 4.775 4.576 4.391 4.219 4059 3.910 8 2.659 1.690 10.828 10.059 9372 8.756 8.201 T702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 19 3.134 2.085 11.158 10336 9.604 8.950 8.365 7839 7366 6938 6.550 6.198 5.87 5.584 5.316 5.070 4843 4.635 4442 4.263 4097 3.942 20 13.590 2462 1470 10594 9818 9.129 8.514 1963 7469 1025 6.623 6.259 5929 5628 5.353 5.101 4870 4.657 4.460 4.279 410 3.954 21 4.029 2.821 11.764 10.836 10.017 9.292 8649 8075 1562 7102 6.687 6.32 5973 5665 5.384 527 4891 4675 4.476 4.292 4121 3963 22 14.451 12 163 12.042 11.061 10.201 9.42 82 8176 7.645 170 6.743 6.359 6.011 5.696 5.410 5149 4.909 4.690 4.488 4.302 4.130 3970 23 14.857 489 2.303 1272 0.371 9.580 8.883 8.266 7718 7230 6.792 6.399 6.044 5.723 5432 5167 4925 4.703 4.499 4.31 4.137 3.976 24 5.247 3799 12.550 11.469 10.529 9707 8.985 8.348 7.784 7283 6.835 6434 6073 5.746 5.451 5182 4.937 4713 4507 4318 4143 3981 25 15.622 14.094 2.783 1654 10.675 9823 9077 8422 1843 7330 6873 6464 6097 5.766 5467 5.195 4.948 4721 454 4323 447 3.985 26 15.983 4.375 13.003 11.826 10.810 9.929 9161 8.488 7.896 1372 6.906 6.491 6.118 5.783 5.480 5.206 4956 4.728 4.520 4.328 4.151 3.988 27 16.330 14.643 13.21 1987 10.935 10.027 9237 8.548 1943 7409 6.935 6.514 6.136 5.798 5492 5.215 4.964 4.734 4.524 4.332 4154 3.990 28 16.663 14.898 3406 12.137 11051 1016 9.307 8.602 1984 7441 6.961 6.534 6.152 5.810 5.502 5.223 4970 4.739 4.528 4.335 4157 3992 29 6.984 6.141 3.591 12.278 11.158 10.198 9370 8.650 8.022 7470 6.983 6.551 6166 5.820 5.510 5.229 4.975 4743 4.531 4.337 4159 3994 30 7292 5.372 3.765 2409 11.258 10.274 9427 8694 8.055 7496 2003 6.566 6 5.829 5.57 5.235 4979 4.746 4.534 4.339 4160 3.995 40 9.793 7159 15.046 3.332 11.925 10.75] 9779 9.79 8951 8244 7634 7105 6.642 6233 5871 5.548 5.258 4997 4760 4.544 4.347 4166 3999 Req 1 Req 2 Req Req 3B Compute the project's net present value. (Round your final answer to the Net present value Req 1 Reg 2 Req 3A Req 3B Compute the project's simple rate of return. (Round your answer to 12.3%.) Simple rate of return % Req 1 Reg 2 Req Req 3B Would the company want Derrick to pursue this investment opportunity? Yes ONO Req 1 Reg 2 Req Req 3B Would Derrick be inclined to pursue this investment opportunity? OYes ONO