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 $3,000,000 investment in equipment with a useful life of five years and no salvage value, Holston Company's discount rate is 15%. The project would provide net operating income each year for five years as follows: Sales $ 2,500,000 Variable expenses 1,000,000 Contribution margin 1,500,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 600,000 Depreciation 600,000 Total fixed expenses 1,200,000 Net operating income $ 300,000 Click here to view Exhibit 128-1 and Exhibit 1282, to determine the appropriate discount factor(s) using tables Required: 1. Compute the project's not present value. 2. Compute the project's simple rate of return. 30. Would the company want Derrick to pursue this investment opportunity? 36. Would Derrick be inclined to pursue this investment opportunity? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Req2 Reg A Reg 38 Compute the project's simple rate of return. Simple rate of robum 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 $3,000,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 15%. The project would provide net operating income each year for five years as follows: Sales $ 2,500,000 Variable expenses 1,000,000 Contribution margin 1,500,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 600,000 Depreciation 600,000 Total fixed expenses 1,200,000 Net operating income $ 300,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables, Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return 30. Would the company went Derrick to pursue this investment opportunity? 36. Would Derrick be inclined to pursue this investment opportunity? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 2 Reg JA Regi Reg 38 Compute the project's net present value. (Round your final answer to the nearest whole dollar amount.) Not present value reg Reg 2 > +13) 5561 S60 98EO SSED OLEO N 6 NOS O NOCO 1090 2010 EXHIBIT 128-1 Present Value of 51 (1+y Periods 45 55 64 75 89 99 10% 119 129 139 1:49 155 165 175 185 20% 215 2256 235 245 25% 1 0.962 0952093 0935 0926 0917 0.909 0.901 0893 0.885 0877 0.870 0.862 0855 08470840 0.839 08260820 0813 0 806 0.800 2 0.007 0.0 0.875 0.857 0.842 0.826 0.8120.797 07830.769 0.756 0.743 0.731 0.7180.706 0.694 0.683 0672 0.661 0.650 0.680 3 ON 0.861 ORO 0.816 0.294 0.772 0.751 0.731 0.712 0.693 0675 0.65 0/641 0.624 0.609 0593 0.579 0564 0.551 0.537 0.524 0.512 4 0835 0.823 0.792 0.763 0.735 0.708 0.68 0.6592 0636 0.613 0.592 0.572 0552 0.534 0516 0.499 0482 0467 0451 0437 04210410 S 0822 0.784 0.747 0.713 061 0.450062105930567 0.5430319 0.497 0.4760456 0437 04190.402 0.341 0.328 6 0.790 0.746 0.705 0.666 0.6300595 056 0335 0.507080 0,456 0.432 0410 0.00 0.370 0.352 0.335 0319 03030289 0.275 0.262 7 0.700 0711 0665 0623 0.33 03470513 0 4820452 0.4250.400 0.376 0.354 0.33 03140.2960.279 0.263 0.249 0.235 0.222 0.210 0.231 0.677 0.527 0382 0.3400302 0.467 0.434 0.4044 0.3760 151 0.127 0.105 0.285 026610249 0233 0.218 0.204 0.191 0.179 0.168 0.703 0.6450.592 0.544 05000460 0424 09 0361 0.333 0.KIN 0.2840263 0243 0.225 0.209 0.194 0,1800,167 0.155 0.144 0.134 10 0.676 0.614 0358 0.400.422 0.186 0352 0.22 0.295 0.270 0.247 0.227 0.20 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.102 11 0.650 0.585 0.3270475 0.4290388 03500317 0.287 0.26110237 0.215 0.1950.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 12 0.625 0557 0.497 0.444 0.397 0156 0119 02860257 0.231 0.187 0.168 0.152 0.13 0.124 0.112 0.102 0.092 | ODR3 04076 0060 13 03300.4690415 0.368 0.326 0.290 0.2580229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0093 0.0840075 DR 0055 14 0.577 0.505 0.4420388 0.140 0.299 0.263 0.2020 205 0.181 0.1600 141 0.125 0.111 0.088 0.078 0.069 0062 0.055 0.0190044 15 0355 0.41 0417 0362 0.3150273 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.015 0.0400035 16 0.534 0.458 0.194 0119 0.292 02520218 0.188 0.163 0.141 0.12 0.107 0.09 0.08 0071 0162 0.054 00470042 0036 0.032 0,028 17 0.313 0.436 0.371 0317 0.270 0231 0.1980.100.146 0.125 0.10 0.093 0.0800069 000 00320045 0.039 0.034 0,030 0.026 0.023 15 0.494 04160350 0.296 0.250 0.212 0.10 0.15 0.130 0.111 009 0.06900590081 0.044 0.03 0.032 0028 0024 0.021 DOIN 19 0.475 0.396 0910.277 0232 0.194 0.16 0.13 0.116 0,098 DDR3 0.070 0.000 0.051 0.043 0.037 0.031 00027 002 0.02000170014 20 0.456 01770.312 0.255 0.215 0.178 0.149 0124 0.104 0.087 0073 0.061 0051 OX 0.037 00310026 0.022 0.019 0.016 0014 ODI2 21 0.419 0.1990 294 0242 0.1990.164 0.1150.112 0.093 0.07701264 0.053 0044 0017 0.031 0026 0.0220018 0.005 0013 0011 0.009 22 0,422 0.342 10.278 0226 0.184 0.750 0.123 0 101 003 0.008 0.056 0.046 0038 0.032 0.026 0.022 0018 0.015 0.013 0.011 23 0406 01260.22 0.211 0.00 0.007 0.1700.138 0.11200910074 0.000 019000 0033 0.027 0022 O DIX 0,015 0,012 0010 0.00 0.007 0.390204110 0.247 0.197 0150126 0.102 0012 0.066 0.0530.043 0.035 0.028 0.023 0.019 0015 0.0130010 0.008 0.007 0.006 25 0.875 0.293 0.3 0.184 0.14670.116 0.092 0.0300024 0.020 0.016 0.006 ODS 0.004 26 0.361 0.281 0.220 0.172 0.135 0.106 0840066 005 00420033 0,026 0.021 0.017 0014 0.011 0.009 0.007 0.004 0.003 27 026 0.307 0.16 0.125 0090076 000 0047 0037 0029 0,023 00180014 0011 0.0070006 0.005 000 0.001 0.002 28 0.333 0.235 0.19 0.150 0.116 000 0.069 005 0042 0.001 0.026 0020 0.016 0012 0.010 DOON 0.0060005 0.004 0.000 0.002 0.002 29 0221 0.243 0.185 0.141 0.107 0.02 0.061 0.00037 00290022 0.017 0014 0011 0.005 0.004 0.003 0.002 0002 002 VO 0.231 0.174.131 0.075 0.057 0011 0.025 0.020 0,015 0,012 0009 0.07 ODOS 0.004 0.003 0.003 0.002 0.002 0.001 40 0.00.142 0097 0.067 0.046.0032 0.022 0.015.00 0.00 0005 0.002 0.001 0.001 0.001 0.000 0.000 0.000 000 5600 1800 ISO | W KYO 5000 NETO HO SCOTLOO ( 100 200060000100 9000 SOTO HU DO SOKO 9000 SOLO | | 6600 100 MOTO COTONO DOTO EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears (1/(1+r)n)) 175 1586 3.312 3.50 Periods 49 59 69 79 89 99 104 1150 126 135 149 15 16% 18% 199 20% 219 224 23% 244 25 1 0.962 0.952 0943 0.935 0.926 091709090901 0.893 ORS 0.822 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0813 0.806 0.800 2 1859 1833 INOS 1.21 1.759 1.736 1.713 1690 1668 1.647 162616051.585156615471528 1.509 1.492 1474 14571440 3 2.775 2.72327673 2.624 2.577 2.531 2487 2444 2402271 2022 2.283 2.246 2.210 2.174 2.140 2.106 2074 2042 2011 1.9811.952 4 1.6.10 35463,465 3.387 3.240 3.170 13.102 3.037 2974291428552.7982.7432.692.639 2589 2.540 2.494 2448 2.4042362 5 4.4524129 4.212 4.100 3.993 3.820 3.791 3.696 3.605 3.517 3433 3.152 32743.1993.1273,058 2.991 2.926 26 2.803 2.7452689 6 5.24250764917 4.767 4623 4.4864.355 4.231 4.111 3.998 3.8893.784 36853.589 3.4983410326 3.245 3.167 3092 3020 2951 7 6.000 5.786 3382 5.389 3.206 5,033 4.868 4.712 45644423 4.288 4.160 40393.922 3812 3.776 3605 3416 3327 3.242 3.161 8 6.700 6.466 210 5.921 5.747 5535 5335514649684.799 4.639 4487 4344 4.2074078 3.9543.837 3.726 3619 3518 3421 3329 9 74357. TO 6802 65156.247 5.9955.7595537 53285.132 4946 4.7724.607 4451 4.103 4.163 4.031 3.905 3.786 3.6735663463 10 8.117.722 7360 7024 6.710 6,418 6.145 5889 5.650 5.426 5.216 51019 48334.659 44944339 4.192 4.054 3.923 3.799 3.682 3.571 11 8.760 82306 78577499713968056,495 6.207 5.938 5687 5453 5.23450294.8364656 4486 4.327 4.1774.035 3.902 3.776 3.656 12 9:385 8863 83847943 7536 7.161 68146,492 6.1965918 5,660 54215.197 4988 4.793 4.6114.43942784.127 3.985 3.851 3.725 9086 194 8.85383587904 7.487 7103 6.750 6424 6.1225842 3583 5.342 5.118 4.910 4.7154.533 4.3624.203 4053 3.912 3.780 14 10.5639.899 9.295 8.745 8.244 17.78673626982 6.628 6.302 6.0025.72454685.229 SOON 4.8024611 44324.265 4.108 3.962 3.824 15 11:118 10.1109.712 19.108 8359 8.061 7.606 17.1916811 6.462 6.142 5.8475575 5324 5092 48764675 4.489 4.315 4.1534001 3.859 16 11.052 10838 10.106 9.447 8851 831378247379 6.9746.604 6.265 59545,668 5.405 5.162 4938478045364157 4.189 4033 3.882 17 12.1661124104779.763 9.122 8544802275497.1206.729 6373 6.047 5.749 5.4755222 4.990 4.275 4576 4.391 4.219 4059 3910 IN 12.659 11.690 10828 10.0599372 8.756 8.2017.702 7.250 6.840 6.467 6.128 5.818 5.534 5273 5.033 4,812 4 SON 4419 4.2434.000 3.925 19 13.134 120 11.15 10 3369604 8950 8.3657839 7366 6938 6.550 6.198 5.877 55845 316 S.ON 4843 4635 44424.263 4,097 3.942 20 13.590) 12.462 11.470105949818 9.129 8.514796317,469 7025 6623 6.259 59295623 5353 5.101 4.870 4657 44604.2794.1103954 21 14.029 1282111764 10.836 10.017 9.292 8.649 8075175627.1026687 6312 59735.6655.384 5.1274891 4.675 4476 4.292 4.121 3063 22 14.451 116012042 11.061 10. 2019.442 8.7728.1767645 17.170 6743 6359 6011 5.696 54105.1494.209 4.690 448 4.302 4.1303970 20 14.357 13.489121031127210.171 9580 8.883 8266 7.718 72306.7926399 604413.723 54325.1674.925 4.703 4.499 4.311 4.137 3.976 34 15.347 13.799 1235011469 10.5299,707 89858.3487.7847.2836.835 6,4346.073 5.746 3.451 5.18249374.7134.5074318 4.14) 3.981 25 1562214094127311654 106759.82390778422784370 6873 64646097 576616715.195 4.948 4.721 4514 4.323 4.147 3.985 26 150 14.375 11126 101019929 9.161 8488 789673726.06 6,916.118 5.73 54805.2004956 4.72 27 4320432H 4.131 3988 16.30 14.64121111.987 10.935 10.02292371548 79437.09 6.935 63146.1365.798 5.4925.215 14.964 4.71414524141124.154 300 2x 16614 91006 12.13711051101169107 N.NO 7984746.96165446.152 5.810 S.S0223 4.920 4.7:19 4528 4335 4.157 3.992 1695 15 141 13.591 12271115810.1989 370XASO 02274069 65516166 5.20 53105.229 30 4975 4.7434511 4.159 3.994 172921537212.76512409 1 258 10.27494278.694 80357.2967001 65666.1775295317523549794.746453443394.160 3.995 40 192.799 17.15915046 211.923 10.757977938951244.76342.105 6.61262135715.5485258 4.997767604.544 4.347.4.166 3.999
