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 $3,700,000 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: $3,100,000 1,380, eee 1,800,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 660,000 740,000 1,400,000 $ 400,000 trobat om 002660220019001600M 0012 2004 03 020 0258 0215070M0020100017 OB 00610051003 190475 0.396 0331 0277 0232 0194 0154 01380116 0098 DORI 0070 0.060 005) 0043 0031 0.03 0021 0023 0.020 001001 os00440033 00320028 0024 0021 0018 0.095 0081 0069 0059 0494 0.45 0.350 026 0250 022 010 0163 013001 18 05130436 0371 03170270 0231 0198 01700146 0125 0908 0093 000 000 0060 00520045 0629 0034 0030 0026 0.023 1 0054 0041 0.042 0036 0032 0028 0534 0458 0.394 0209 0292 0252 0218 0988 0163 0141 0123 01070093 0.081 on 006 16 SEOO OOO SVOO 1500 500 5900 W06 1900 5600 800 CALOOBLO 030 RIO 6020 SEZO SIZO SEO 2900 LIDO 180 SSSOS VOO 6900 S500 2900 6900 R/00 8800 6500 LO SZLOKO 0910180 SOZO REZO E920 6620 OVEO 8E0 200 Soso uso R SSOO 1900 8900 SOD 0800 600 VOLO 940 000 O ESO 2810 POCO GUO 8CO 0620 900 890 SO 690 OESO 1090 6900 900 9800 2600 2000 210 VIOLELO SLO 890 180 8OZO KEZO ASCO SCOGLED 95E0 260 90 (60 ESSO S290 a 0103 0094 0086 0135 0123 01 0650 055 0.527 047 0429 0388 0350 0317 0287 0261 0237 0215 09950178 0162 014 0676 0614 0558 0508 0463 0422 0386 0352 0322 0295 0270 0247 0221 0208 0191 0176 052 019 0137 0126 0116 0107 0703 0545 0592 0544 0500 0 460 0424 0.391 0.361 0333 0.308 0284 0263 0243 0225 0209 0194 01800167 0155 0144 0134 0731 06770627 0582 0540 0502 04670434 0404 0376 0351 0327 0.305 075 0266 0249 0233 0 218 0204 0191 01790168 10 9 8 OLZO ZO SEZO 620 E9ZO GIZO 9620 MEO CEO VSEO 920 000 SZVO SVO NO EISO ISO ERSO 6290 5990 ZO 0920 2920 SEZO GAZO EOCO6LEO SEO SEO OLEO 060 OLO LEVO 9510 080 2050 SESO 1950 950 0890 9990 SOO 900 060 9 BZEO LEO SSEO OLEO 980 200 610 LEVO 9550 90 2670 6150 EXO 1990 E650 1290 0590 1890 EIZO ZOTRO 270S OLVO ECVO LEVO SVO 290 2890 66V09150 KSO 550 USD 2650 190 9690 6590 1890 8020 SZOSCO C620 600 580 ISO 150 LESO ISSO VISO 6/50 E6SO 6090 1790 1790 8590 5490 6690 2120 KEZO ISZO UO 620 980 0080 1980 6880 E 0090 0990 1990 2290 0890 1690 9020 8120 LELO EWO 9520 WO ERZO 2620 280 280 280 2580 280 0680 2060 S2602 008 0 9080 ELBO 0280 WBO EERO OVO 1180 5580 2980 0280 1280 SHHO E680 1060 6060 2160 960 5E60 160 0560 20 he EXHOT 201 Present Value of t | 21 0439 0.359 0294 0242 0199 0164 0135 012 0093 007 0064 0053 004 0037 0031 0026 0022 0018 005 0013 001 0009 22 0422 0342 0278 0226 OIBA 0150 0123 0101 0083 0068 0056 00465 0038 0032 0026 0022 008 006 0013 001 0009 0007 23 0406 0326 0262 0 0 0138 012 001 004 0060 0049 0040 0033 0027 0022 0018 006 0012 0010 0000 0007 0006 200390 0.30 0247 097 058 0126 0102 0082 006 0053 00M3 005 0028 0023 009 005 006 0010 0008 000 0006 0005, | 5 0375 0295 0233 0184 0146 016 0092 004 0059 0047 0038 0030 0024 0020 006 0013 0010 0009 0007 0006 0005 0004 0 0361 0281 0220 01/20135 0106 004 006 0053 0042 003 0026 0021 001 004 001 0009 0007 0006 0005 0004 0003. 27 0347 0268 0207 0161 0125 0098 006 0060 0047 007 0029 0023 0018 0014 0011 0000 0007 0006 0005 000h 0003 0002 | 28 0303 0255 0196 0 150 016 0000 0069 0054 0.042 0033 0026 0020 0016 002 0010 0008 0006 0005 0004 0003 0002 0002 | 29 0321 0243 0185 0M] 0107 0082 0063 100MB 0037 0029 0022 0017 004 001 0008 0.006 0005 0004 0003 0002 0002 0002 | 30 10308 0231 0174 0131 0049 0075 0057 004 0012 0026 1020 006 002 004 0007 0005 000M 0003 0003 0002 10002 0001 | 40 02/08 042 007 0067 004 0032 002 00(111 0008 0005 000M 0003 0002 001 0001 0001 0000 0000 0000 0000 0000 EXHIBIT 128-2 Present Value of an Annuity of S1 in Arrears: [ - ] Periods 4% 5% 6% 7 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0.952 0.943 09350926 0917 0909 0.901 0893 0.885 0877 0.870 0.862 0855 0.847 0840 0.833 0.826 0820 0.813 0806 0.800 2 1886 1859 1833 1808 1783 1759 1736 1713 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1492 1474 1457 1440 3 2775 2723 2673 2624 2577 2531 2.487 2444 2402 2361 2322 2283 2246 2210 2174 210 2106 2074 2042 2011 1981 1952 4 3.630 3546 3.465 3.387 3.312 3.240 31703102 3037 2.974 291 2855 2798 2743 2690 2639 2.589 2540 2494 2448 2404 2 362 5 4452 4329 4212 4100 39933.8903 791 3696 3605 3517 3433 3352 3.274 3199 3127 3058 2991 2926 2864 2803 2745 2689 6 5242 5076 4917 4767 4623 4486 4355 4 231 4111 3998 3.889 3784 3685 35893198 3410 3326 3245 3167 3092 3020 2951 7 6002 5786 5582 5389 5206 5033 4868 4712 4564 4423 4288 4160 4039 3922 3812 37063605 3508 3416 3327 3242 3161 8 67336463 6210 5971 5747 5535 5335 516 4968 4799 4639 4487 43444207 4078 3954 3837 3.726 3619 3518 3.421 3329 9 7435 7108 6802 6515 6247 5995 5759 5537 5328 5132 49464772 4607 4451 4303 4163 4031 39053786 36733566 3.463 10 8111 772273607024 6710 6418 6145 5889 5650 5426 5 216 5 019 4833 4659 4494 4339 4192 4054 3 923 3799 3682 3571 11 8760 8306 7887749971396805 6495 6 207 5938 5687 5453 5234 5029 4836 4656 4486 4327 417 4035 3902 3776 3656 129 3858863 8384 7943 7536 7161 6814 6 492 6194 5918 5.660 5421 5197 4.988 4793 4611 4439 4278 4127 3.985 3851 3725 13 99869.394 8853 8358 7904 7487 7103 6750 6424 6122 5.842 5583 5342 5.118 4910 4715 4533 4362 4203 4053 3912 3780 14 10563 9.899 9295 8745 8244 7786 7367 6.982 6 628 6 302 6.002 57245 468 5.229 5,008 4802 4611 4432 4265 4108 3962 3.824 1511118 10380 9712 9108 8.559 8.061 7606 7191 6811 6462 6142 5847 5575 5324 5.092 4876 4675 4.489 4.31541534001 3859 16 11652 10.838101069.447 8.851 8313 7824 7379 6974 6604 6.265 5954 5668 5.405 51624938 47304536 4357 41894033 3887 17 2.166 11274 10.477 9763 9122 8544 8022 7549 2120 6729 6373 6047 5749 5.475 5222 4990 4.775 4576 4391 4219 4059 3910 18 2659 11.69010828 100599372 8756 8201 7702 7250 6840 6 467 618 5818 5534 52735033 48124608 4.419 4243 4080 3928 1913134 12.085 11158 10.336 9604 8950 8365 78397366 6938 6550 6198 581 5584 5.316 5070 48434635 4442 42634097 3942 5470527 345 19 3 4 12085 11158 10336 9604 8950 8365 7839 2013.590 12.462 11.47010594 9818 9129 8514 7963 7469 7025 6623 6.259 5929 5628 5353 5101 4870 4657 4.460 4279 41103954 21 14029 12 821 11764 10836 10017 9292 8649 8075 7562 7102 6687 6.312 5973 5665 5384 51274891 4675 4476 4292 41213963 22 1451 13163 12042 11061 10 201 9.442 872 8176 7645 7170 67436359 60115696 5410 519 4909 46904488 4302 41303970 23 1857 13 489 12 303 11272 10371 9580 8883 8266 7718 7230 6792 6.399 6,044 57235432 5167 4925 4.7034499 4311 41373976 24 15 247 13 799 12.550 11.469 10.529 9707 8985 8348 7784 7.2836.835 64346.073 5146 5451 5182 4932 47134507 4318 41433981 25 15622 1094 12.783 11654 10675 9823 9077 84227843 73306873 6.464 6.097 5766 5.467 51954948 4721 4514 4323 4147 3985 2615983 14375 13.003 11826 10810 9929 9161 8488 7896 7372 6.906 6491 6118 5783 5480 5206 4 956 4728 4520 43284151 3988 27 1633014643 13.211 11.987 10935 10.027 9 237 8.548 7943 7409 6935 651 6136 57985492 5 215 4.964 4734 4524 4332 41543990 28 16663 14898 13.406 12.137 11051 10.116 9.307 8602 7984 7441 6.961 6534 6152 5.810 5502 52234970 47394528 43354157 3992 29 1698415141 13591 12278 11158 10.198 9370 8650 8022 7470 6983 6551 6166 5820 5.510 5229 4975 4743 4531 4337 41593994 30 1729215372 13765 12.409 11258 10274 9427 8694 8055 7496 7003 6566 6177 5829 551 5235 4.9794746_1534 433941603995 021250150413371197510757 9779 8951 8244 7634 71056642 6 233 58715.548 6258 499747604544 4347 4166 3999 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 Req 3B Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Net present value
