Help Save & Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five- year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows Product A Products Initial investment: Cost of equipment (zero salvage value) $ 350,000 $ 550,000 Annual revenues and costs: Sales revenues $ 390,000 $ 470,000 Variable expenses $ 178,000 $ 210,000 Depreciation expense $70,000 $ 110,000 Fixed out-of-pocket operating costs $ 87,000 $ 67,000 The company's discount rate is 20% Click here to view Exhibit 148.1 and Exhibit 148-2 to determine the appropriate discount factor using tables Required: 1. Calculate the payback period for each product 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product 5. Calculate the simple rate of return for each product 6a. For each measure, identify whether Product A or Product B is preferred 6bBased on the simple rate of return, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. 2 of 5 Next > Prev 2 of 5 !!! Next > OP *] P3 Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Reg 4 Req 5 Req 6A Req 6B Calculate the net present value for each product. (Round your final answers to the nearest whole dollar ar Product A Product B Net present value 2 of 5 hop * entering your answers in the tabs below. Reg 1 Reg 2 Reqa Reg 4 Reg 5 Reg 6A Req6B Calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place 1.0.0.123 should be considered as 12.3%.) Product Product B Internal rate of return % OP Sion accept? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Rea4 Reg 5 Req 6A Reg 6B Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Product Product B Profitability index 2 of 5 !!! Next > OP preferred Simple rate of return, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Reg 3 Req 4 Req 5 REGGA Reg 6B For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period Internal Rate Simple Rate of of Return Return Prey 2 of 5 Next > OD *1 accept Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req 3 Req4 Reg 5 Req 6A Req 6B Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A Accept Product B Reject both products 6px] Pa
