Just need req 4
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 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero $270,000 $480,000 salvage value) Annual revenues and costs: Sales revenues $320,000 $420,000 Variable expenses $148,000 $198,000 Depreciation expense $ 54,000 $ 96,000 Fixed out-of-pocket operating $77.000 $ 57,000 costs The company's discount rate is 19%. Click here to view Exhibit 13B-1 and Exhibit 13B-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 project 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. 6b. Based on the simple rate of return, Lou Barlow would likely: X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Req 5 Req 6A Req 6B Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period 2.84 years 2.910 years Req 1 Reg 2 Req 3 Req 4 Req 5 Req 6A Req 6B Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product Product B $ 24,570 Net present value $ 20,510 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 6B Calculate the internal rate of return for each product. (Round your answers to 1 de place i.e. 0.123 should be considered as 12.3%.) Product Product B Internal rate of return 22.4 % 21.3 % Req 1 Req 2 Req 3 Req 4 Req 5 Req6A Req 6B Calculate the project profitability index for each product. (Round your answers to 2 decima places.) Product A Product B Project profitability index 1.08X 1.08 X Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 6B Calculate the simple rate of return for each product. (Round your answers to 1 deci place i.e. 0.123 should be considered as 12.3%.) Product A Product Simple rate of return 15.29% 14.49% Req 1 Req 2 1 Req3 Req 4 Req 5 Req 6A Req 6B For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period Product Internal Rate of Return Product Simple Rate of Return Product Product Product A Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 6B Based on the simple rate of return, Lou Barlow would likely: Accept Product Accept Product Reject both products
