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Problem 13-17 Net Present Value Analysis: Internal Rate of Return; Simple Rate of Return (LO13-2, LO13- 3, LO13-6) Casey 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 22% each of the last three years. Casey is considering a capital budgeting project that would require a $3,800,000 Investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 18%. The project would provide net operating income each year for five years as follows: $ 3,700,000 1.720,000 1,980,000 Sales Variable expenses Contribution margin Fixed expenses Advertising. salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 730,000 760,000 1,490,000 $ 490,000 Click here to view Exhibit 138.1 and Exhibit 13B-2, to determine the appropriate discount factor(s) 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? 4-a. Would the company want Casey to pursue this investment opportunity? 4-b. Would Casey be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. EXHIBIT 138-1 Present Value of St . Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 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 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0783 0.769 0.756 0.743 0731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0640 0.889 0 864 0.840 08 16 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0579 0.564 0.551 0.537 0.524 0.512 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0636 0.613 0.592 0572 0.552 0534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 5 0.822 0.784 0.747 0.713 0681 0.650 0.621 0 593 0 567 0543 0519 0497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0 341 0.328 8 9 10 0.790 0.746 0.705 0.665 0.630 0.596 0.564 0 535 O 507 0480 0456 0.432 0.410 0 390 0.370 0 352 0 335 0.319 0.303 0.289 0 275 0.262 0.760 0.711 0.665 0623 0583 0547 0.513 0.482 0.452 0425 0.400 0.326 0.354 0.333 0314 0.296 0 279 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0376 0351 0.327 0.305 0.285 0.266 0.240 0 233 0 218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0333 0.308 0 284 0 263 0243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.650 0.585 0.527 0.475 0.429 0.388 0 350 0.317 0787 0 261 0237 0215 0.195 0.17 0.162 0.14 0.135 0 123 0.112 0.103 0094 0.086 0.625 0 557 0.497 0.444 0.397 0 356 0319 0286 0257 0231 0208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.003 0.076 0.069 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.0B4 0.075 0.068 0.061 0.055 0.577 0.505 0.442 0.388 0 340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0069 0.062 0.055 0.049 0.044 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.005 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 14 16 17 18 19 20 0534 0.458 0 394 0.339 0.292 0.252 0218 0.188 0.163 0.141 0.123 0 107 0.093 0081 0.071 0.062 0.054 0.047 0042 0.036 0.032 0.028 0.513 0.436 0.371 0317 0 270 0231 0.198 0.170 0 146 0.125 0108 000) OOO 0069 0 060 0052 0.045 0039 0034 0030 0026 0.023 0.494 0.416 0.350 0296 0.250 0.212 0 180 0.153 0.130 0.111 0095 O OB1 0 069 0059 0 051 0044 0018 0032 0028 0024 0.021 0018 0.475 0.396 0.331 0.277 0.232 0.194 0.154 0.138 0.116 0.098 0083 0.070 0.060 0 051 0.043 0.037 0031 0027 0023 0020 0.017 0.014 0.456 0.377 0.312 0.250 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0061 0.051 0043 0.037 0031 0026 00220019 0016 0.014 0.012 21 23 24 25 26 22 0.439 0.359 0.294 0242 0.199 0.164 0.135 0.112 0093 0.077 0064 0.053 0.044 0.037 0.031 0.025 0.022 0.018 0015 0013 0.011 0.009 0.422 0342 0278 0226 0.184 0150 0.123 0.101 0083 0.068 0056 0046 0038 0032 0.026 0022 001B 0015 001) 0011 0000 0007 0.406 0326 0262 0211 0110 0.13 0.112 0.091 0.074 0.060 0049 0040 0.033 0027 0.022 018 0015 0012 0010 0000 0007 0006 0.390 0.310 0247 0.197 0.158 0.126 0.102 0.082 0.066 0 053 0043 0035 0.028 0.023 0.019 0.015 0.013 0.010 0008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0010 0.000 0.007 0006 0.005 0.004 0.361 0.281 0220 0.172 0135 0.106 0004 0.066 0053 0.042 0.033 0026 0.021 0.012 0.014 0.011 0.000 0.007 0.006 0005 0004 0003 0.347 026 0207 0.161 0.125 0.008 0.076 0.060 0047 0.037 0 029 0023 0.018 0014 0011 0000 000 0006 0005 0004 2003 2002 0.333 0255 0.196 0.150 0 116 0000 0069 0054 0042 0.033 0.026 0020 0.016 0012 0010 0000 0000 0005 0004 0003 0002 0.002 0321 0243 0.185 0.141 0 107 0082 0.063 0.048 0.037 0.029 0.022 0017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0002 0.002 0.308 0.231 0.174 0.131 0.000 0.075 0.057 0.044 0.033 0026 0.020 0015 0012 0.000 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.007 0.067 0046 0.032 0.022 0,015 0,011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 29 30 40 EXHIBIT 133-2 Present Value of an Annuity of $1 in Arrears:- Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 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 1626 1505 1585 1 566 1547 1528 1509 1,492 1,474 1457 1.440 3 2.775 2.723 2.673 2624 2577 2531 2487 2.444 2.402 2361 2322 2283 2246 2210 2 174 2140 2 106 2074 2042 2.011 1.981 1952 4 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2974 2914 2.855 2.798 2743 2690 2639 2589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 3 6 9 10 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3998 3999 3.784 3.685 3589 3498 3410 3 326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 5.389 5.206 5,033 4.868 4.212 4,564 4.423 4 288 4.160 4.039 3922 3812 3706 3.605 3.508 3.416 3.327 3.242 3.161 .733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4 908 4.299 4 639 4.487 4.344 4 207 4078 3954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5 328 5.132 4.046 4.772 4 607 4451 4.303 4.163 4031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5 216 5019 4.833 4659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7.499 2.139 6.805 6.495 6. 207 5938 5.687 5453 5 234 5029 4836 4656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 9.385 8863 8 384 7.943 7536 7.161 6814 6.492 6.194 5.918 5.660 5421 5.197 4 988 4793 4.611 4439 4 278 4.127 3985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7 103 6.750 6.424 6.122 5 842 5 583 5 342 5.118 4.910 4715 4533 4.362 4 203 4053 3.912 3.780 10.5639 899 9.295 8.745 8.244 2.286 7367 6982 6.628 6.302 6002 5.724 5.468 5.229 5008 4 802 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8,061 7.606 7.191 6,811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4,489 4 315 4.153 4001 3.859 14 15 16 18 19 20 11.652 10.838 10.106 9,447 12.166 11.274 10.477 9.763 12 659 11.690 10.828 10.059 13 134 12085 11.158 10.336 13.590 12.462 11.470 10.594 8.851 8.313 7.824 7379 6.974 6,604 6 265 5 954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4,033 3.897 9.122 8.544 8.022 7.549 7.120 6.729 6373 6047 5.749 5.475 5222 4.990 4775 4,576 4 391 4.219 4.059 3.910 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5033 48124.608 4.419 4.243 4.080 3928 9.604 8.950 8.365 7.839 7. 366 6.938 6.550 6.198 5.877 5.584 5.316 5.020 4.843 4.635 4,442 4.263 4,097 3942 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 3954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8075 7.562 7.102 6.687 6 312 5.973 5665 5 384 5.127 4.891 4.675 4.476 4.292 4.121 3963 14.451 13.163 12.042 11.061 10.2019.442 8.772 8.176 7.645 7.170 6.743 6.359 6011 5.696 5410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8.8.83 8 256 7.718 7.230 6.792 6 399 6044 5723 5.432 5. 167 4.925 4.703 4.499 4.311 4.137 3.976 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8 348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 23 25 27 28 29 30 15.983 14.375 13.003 11826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5 206 4 956 4.728 4.520 4.328 4.151 3.988 16 330 14.643 13.211 11.987 10 935 10027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5492 5215 4 964 4.734 4.524 4.332 4.154 3.990 16.663 14.898 13.406 12.137 11051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5502 5223 4970 4.739 4.528 4.335 4.157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5510 5229 4.975 4.743 4.531 4.337 4.159 3.994 17.292 15 372 13.765 12.409 11.250 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5 235 4 979 4.746 4.534 4.339 4.160 3.995 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 40