EXHIBIT 7B2 Present Value ofan Annuity of$1 in Arrears; 1 1' [ 1 - 1 ( 1 + r ) n] Periods 4% 5% 6% 7% 8%- 9% 10% 11% 12% 13% 14% 15% 16% 17% 18%: 19"/u 20% 21% 22% 23" 24% 25% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 a 2.775 2.723 2.673 2162411952 4 3.630 3.546 3.465 3.387 3.170 3.102 2.974 2.914 2.855 2.743 2.690 2.639 2.589 2.448 2.404 2.362 5 4.452 4.329 4.212 4.100 3.791 3.517 3.433 3.199 3.127 3.058 2.991 2.803 2.745 2.689 6 5.242 5.076 4.917 4.767 4.486 4.355 3.998 3.889 3.589 3.498 3.410 3.326 3.092 3.020 2.951 7 6.002 5.786 5.582 5.389 4.868 4.712 4.423 4.288 4.160 3.922 3.812 3.706 3.605 3.327 3.242 3.161 8 6.733 6.463 6.210 5.971 5.335 4.799 4.639 4.487 4.207 4.078 3.954 3.837 3.518 3.421 3.329 9 7.435 7.108 6.802 6.515 5.759 5.537 5.132 4.946 4.772 4.451 4.303 4.163 4.031 3.673 3.566 3.463 10 8.111 7.722 7.360 7.024 6.145 5.216 4.659 4.494 4.339 4.192 3.799 3.682 3.571 11 8.760 8.306 7.887 7.499 6.495 5.453 4.836 4.656 4.486 4.327 3.902 3.776 3.656 12 9.385 8.863 8.384 7.943 6.814 6.492 5.660 5.421 4.988 4.793 4.611 . 3.985 3.851 3.725 13 9.986 9.394 8.853 sass mo 14 10.563 9.899 9.295 8.745 7.367 6.982 6.302 6.002 5.229 5.008 4.802 4.611 4.108 3.962 3.824 15 1111810380 9.712 9.108 7.606 7.191 6.462 6.142 5.847 5.324 5.092 4.876 4.675 4.153 4.001 3.859 16 11.65210.838 10.106 9.447 7.824 7.379 6.604 6.265 5.405 5.162 4.938 . 4.189 4.033 3.887 17 1216611274 10.477 9.763 8.022 7.549 6.729 6.373 5.475 5.222 4.990 4.775 4.219 4.059 3.910 18 1265911690 1082810059 8.201 6.840 6.467 6.128 5.534 5.273 5.033 4.812 4.243 4.080 3.928 19 13.13412.08511.15810.336 8.950 8.365 6.938 6.550 6.198 5.584 5.316 5.070 4.843 4.263 4.097 3.942 20 13.59012.462 11.47010.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 21 1402912821 11.76410.83610.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 \fCasey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment {ROI}, which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $5,800,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: Sales $ 5,108, 800 Variable expenses 2,288,800 Contribution margin 2,828,800 Fixed expenses: Advertising, salaries, and other fixed outo'Fpocke't costs $ 878,800 Depreciation 1,168,800 Total fixed expenses 2,838,8W Net operating income $ 798,800 Click here to view Exhibit TB'l and Exhibit ?B2, to determine the appropriate discount factoris] using tables. Required: 1. What is the project's net present value? 2. What is the project's internal rate of return to the nearest whole percent? 3. What is the project's simple rate of return? Ia. Would the company want Casey to pursue this investment opportunity? Ib. Would Casey be inclined to pursue this investment opportunity
