Exercise 13-9 Net Present Value Analysis and Simple Rate of Return [LO13-2, LO13-6] 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 $4,200,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 18%. The project would provide net operating income each year for five years as follows: Sales Variable expenses contribution margin Fixed expenses: $3,600,000 1,550, 000 2,050,000 Advertising, salaries, and other fixed out-of-pocket costs Depreciation $700,000 840,000 1,540,000 510,000 Total fixed expenses Net operating income Click here to view Exhibit 138-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables