Don Johnson is a divisional manager for Chargers 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.

Don is considering a capital budgeting project that would require a $4,200,000 investment in equipment with a useful life of five years and no salvage value.

Chargers Companys discount rate is 18%. The project would provide net operating income each year for five years as follows:

Sales		$	3,600,000
Variable expenses			1,550,000
Contribution margin			2,050,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$700,000
Depreciation	700,000
Total fixed expenses			1,400,000
Net operating income		$	650,000

Required:

1. Compute the project's net present value
   • use the present value table to get the correct discount factor
   • Present Value Table for accounting exercise, chapter 11.jpg
2. Compute the project's accounting rate of return
   • round to (1) decimal place, enter number as a percent
3. Compute the payback period
   • round to (2) decimal places