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 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 Companys discount rate is 17%. The project would provide net operating income each year for five years as follows:

Sales		$	2,900,000
Variable expenses			1,200,000
Contribution margin			1,700,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$640,000
Depreciation	640,000
Total fixed expenses			1,280,000
Net operating income		$	420,000

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.