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 19% each of the last three years. He computed the following cost and revenue estimates for each product: Initial investment: Product A Product B Cost of equipment (zero salvage value) Annual revenues and costs: $ 190,000 $ 400,000 Sales revenues $ 270,000 $ 370,000 Variable expenses $ 128,000 $ 178,000 Depreciation expense. $ 38,000 $ 80,000 Fixed out-of-pocket operating costs $ 72,000 $ 52,000 The company's discount rate is 17%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Calculate each product's payback period. 2. Calculate each product's net present value. 3. Calculate each product's internal rate of return. 4. Calculate each product's profitability index. 5. Calculate each product's simple rate of return. 6a. For each measure, identify whether Product A or Product B is preferred. 6b. Based 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. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6A Required 68 Calculate each product's payback period. Note: Round your answers to 2 decimal places. EXHIBIT 148-1 Present Value of $1 1 ((1+x)) Periods 4% 5% 6% 7% 1 11% 0901 2 0.925 3 0.889 0.812 0.731 4 5 6 0.564 7 0.482 8 9 10 0.676 0.614 0558 11 0.650 0.585 0.527 12 0625 0.557 0497 0.444 13 0,601 0.530 0.469 0415 0.368 14 0577 0.505 0442 0.388 0340 15 0555 0.481 0.417 0.362 0315 16 0334 0458 0.394 0.339 0.292 0.275 0.252 0.239 0.209 0.160 0.218 17 18 19 20 21 22 0317 0.270 0.231 0436 0.371 0513 0494 0416 0.350 0.296 0.277 0475 0.396 0.331 0456 0377 0312 0.258 0294 0.242 0439 0.359 0422 0.342 0.278 0.226 0.198 0.170 0.146 0.125 0.108 0.250 0.232 0.212 0.194 0.180 0.164 0.149 0.215 0.178 0.199 0.164 0.135 0.150 0.123 0.184 23 0406 0.326 0.170 0262 0.211 0.138 0.112 24 0.390 0.310 25 0375 0.295 0.233 26 0.361 0.281 27 0.347 0.268 0207 28 0.333 0.255 0.196 29 30 0.158 0.247 0.197 0.184 0.146 0.053 0.042 0084 0.066 0.220 0.172 0.135 0.125 0.098 0.076 0.060 0047 0.037 0.161 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.037 0.063 0.048 0.029 0.022 0.107 0.082 0.141 0.321 0.243 0.185 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.126 0.102 0.153 0.130 0.111 0.138 0.116 0.098 0.083 0087 0073 0.124 0.104 0.077 0.064 0.112 0.093 0.101 0.083 0.068 0.056 0.049 0.091 0.074 0.060 0.053 0.043 0082 0.066 0.095 0.116 0092 0074 0059 0.106 0.047 0038 0.033 0.029 0026 0.033 0.026 0.020 17% 16% 18% 14% 15% 13% 12% 10% 8% 9% 0855 0847 0.840 0.833 0.826 0.820 0.862 0.893 0.909 0.885 0.877 0.870 0962 0.952 0.943 0.935 0.926 0.917 0.672 0.661 0.718 0.683 0.706 0.694 0.743 0.731 0.769 0.756 0.907 0890 0.873 0.857 0.842 0.826 0.797 0.783 0.564 0.593 0.579 0.658 0.641 0.624 0.609 0.712 0.693 0.675 0.772 0.751 0364 0.840 0.816 0.794 0437 0410 0421 0451 0534 0.516 0482 0467 0.499 0.636 0.613 0572 0552 0592 0855 0823 0.792 0.763 0.735 0.708 0.683 0.659 0419 0402 0386 0370 0355 0.341 0.328 0.519 0497 0456 0437 0476 0.593 0567 0.543 0822 0.784 0.747 0.713 0.681 0.650 0.621 0289 0.275 0.262- 0.390 0319 0303 0370 0.352 0.335 0.790 0.746 0.705 0.666 0.630 0.596 0.535 0.507 0.480 0.456 0432 0.410 0.263 0314 0.296 0.279 0235 0.222 0.210 0.249 0452 0425 0.400 0.376 0354 0.333 0.760 0.711 0.665 0.623 0.583 0.547 0513 0.168 0.204 0.191 0.179 0.285 0.327 0.305 0.266 0.249 0.233 0.218 0351 0.134 0.731 0677 0627 0.582 0.540 0.502 0.467 0434 0.404 0.376 0.180 0.167 0.155 0.144 0.225 0.209 0.194 0333 0.308 0.284 0.263 0243 0.460 0.424 0.391 0.361 0.703 0.645 0.592 0.544 0.500 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.103 0094 0.056 0.388 0350 0317 0.287 0.261 0.237 0215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.475 0.429 0.286 0.257 0.231 0.102 0.092 0.083 0.076 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.075 0.397 0.356 0.319 0.130 0.116 0.104 0.093 0.084 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.069 0.062 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.095 0.084 0.074 0.065 0.183 0.047 0.042 0.062 0.141 0.188 0.163 0.052 0045 0.039 0.034 0038 0.032 0.028 0.044 0037 0.031 0.027 0060 0051 0.070 0.061 0.051 0043 0037 0.026 0.022 0.031 0053 0044 0.026 0037 0.022 0.018 0.031 0.022 0.018 0.015 0.046 0.038 0.032 0.026 0.033 0.027 0.018 0.015 0.012 0040 0.022 0.013 0.010 0.023 0.019 0.015 0035 0.028 0.024 0.020 0.016 0.013 0.010 0.009 0030 0.009 0.007 0.017 0.014 0.011 0.026 0.021 0.007 0.006 0.023 | 0018 0014 0.011 0.009 0.006 0.008 0.006 0.005 0.005 0.004 19% 20% 21% 22% 23% 24% 0813 0.806 25% 0.800 0.650 0.640 0551 0537 0524 0512 0.069 0.068 0.061 0.055 0.055 0.049 0.044 0.140 0.123 0.108 0.123 0.057 0.051 0.045 0040 0.035 0.107 0.093 0081 0.071 0.054 0.036 0032 0.028 0.093 0.080 0.069 0.060 0.081 0069 0.059 0.051 0.043 0023 0.019 0.030 0.026 0.023 0024 0.020 0.017 0.016 0.021 0.018 0.014 0014 0012 0015 0013 0.011 0.009 0.013 0.011 0.009 0.007 0.010 0.009 0.007 0.006 0.008 0.007 0.006 0005 0.020 0.016 0.017 0.014 0.012 0.011 0.010 0.008 40 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0015 0011 0.008 0.005 0015 0012 0.004 0.003 0.002 0.0011 0.009 0.007 0.007 0.006 0.005 0.004 0.005 0.006 0.005 0.004 0.005 0.004 0.002 0.002 0.003 0.004 0.002 0.003 0.002 0.001 0.003 0.003 0.002 0.002 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.004 0.003 0.003 0.002 0.002 EXHIBIT 148-2 Present Value of an Annuity of $1 in Arrears. - Periods 1 5% 4% 0.962 0.952 6% 0.943 2 1886 1359 1833 3 4 2.775 2.723 2.673 3630 3546 S 4452 4329 3.465 4212 6 5242 5.076 4917 7 6.002 5.786 5.582 8 6.733 6463 6.210 9 7435 7.108 6.802 4.639 4.946 10 8.111 7.722 11 12 13 14 15 6.811 6.142 16 17 18 12.166 11.274 10.477 9.763 9.122 8.544 12.659 11.690 10.828 10.059 9.372 8.756 8.201 19 13.134 12.085 11.158 10.336 9 604 20 21 22 23 24 25 9.077 26 27 28 29 30 40 22% 23% 15% 16% 13% 11% 14% 12% 85 9% 756 10% 0855 0.847 0840 0833 0.826 0.820 0813 0306 0.00 0.935 0.926 0917 0909 0.901 0.893 0885 0877 0870 0.862 1509 1492 1474 1457 1440 1585 1566 1547 1528 1.647 1626 1605 1690 1668 1.783 1.759 1.736 1713 1808 2042 2011 1981 1952 2.624 2577 2531 2487 2444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2074 2448 2.404 2.362 2.914 3.037 2.798 2.743 2690 2.639 2.589 2.540 2.494 2.974 2.855 3170 3102 3.387 3.312 3.240 3.517 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2803 2.745 2.689 3433 3.352 3.696 3.605 4.100 3.993 3.890 3.791 3.685 3.589 3.498 3.410 3326 3.245 3.167 3.092 3.020 2.951 4.231 4.111 4.767 4.623 4.486 4355 3.998 3.889 3.784 3.605 3.922 3812 3.706 3.508 3416 3327 3242 3.161 4288 4.160 4039 5.389 5.206 5033 4.868 4.712 4564 4423 3.329 3.726 3.954 3837 3619 3518 3421 4.078 4.799 4.968 5.747 5535 5.335 5.146 4487 4.344 4.207 5.971 3463 3.673 3.566 3.786 4451 5.132 4.772 4607 4303 4.163 4031 3905 5995 5.759 5537 5.328 6515 6.247 4.494 4339 4.192 4.054 3923 3.799 3.682 3.571 7.360 7024 6.710 6418 6.145 5.889 5650 5.426 5.216 5019 4833 4659 4.327 4.035 4.177 4486 4.656 5.453 5.234 5.029 4.836 5.687 8.760 6495 6.207 5.938 8306 7.887 7.499 6.805 7.139 5.660 5421 5.197 4.988 4.793 9.385 8.863 8.384 7.943 7536 7.161 6.814 6.492 6.194 5918 4.203 7487 7.103 6.122 5842 6.750 6424 5.583 5.342 5.118 4.910 4.715 4.533 9394 8853 8358 7.904 9.986 4432 4265 4.108 3.962 3.824 4.611 4.802 6002 5.724 5468 5.229 5.008 6.628 6.302 10.563 9.899 9.295 8.745 8.244 7.786 7367 6.982 4.001 3359 5575 5.324 5092 4.876 4315 4.153 4675 4489 8359 5847 9.108 6462 11.118 10.380 9.712 8061 7.606 7. 4033 5.162 4.938 4.730 4536 4357 4.189 8313 7824 7.379 6974 6604 6.265 5.954 5.668 5.405 11.652 10.838 10.106 9447 8851 3.910 5475 8022 7.549 7.120 6.729 6373 6047 5.749 5222 4.990 4.775 4.576 4.391 4219 4.059 7.702 7.250 6840 6.467 6.128 4.419 4.243 4.080 3.928 5.818 5.534 5.273 5.033 4.812 4.608 4843 4.635 4442 4.263 4.097 3.942 8950 8.365 5877 5584 5316 5070 6350 6.198 7.839 7.366 6.938 4870 4.657 4.460 4279 5.353 5.101 4.110 3.954 9.129 6.623 6.259 5.929 5.628 13590 12.462 11 470 10.594 9818 8514 7.963 7469 7025 3963 4.675 4476 4.292 4.121 6.687 6312 5.973 5.665 5384 5.127 4891 14.029 12.821 11.764 10.836 10.017 9.292 8649 8.075 7.562 7.102 5.696 5410 5.149 4.909 4.690 4.488 4302 4.130 3.970 14.451 13.163 12.042 11.061 10.201 9442 8.772 8.176 7645 7.170 6.743 6359 6011 4.925 4.703 4499 4311 4.137 3.976 14.857 13.489 12.303 11.272 10.371 9.580 8883 8.266 7.718 7.230 6.792 6.399 6044 5.723 5.432 5.167 N348 7.784 7.283 6835 6434 6073 5.746 5451 5.182 4937 4.713 4.507 4318 4.143 3.981 15.247 13.799 12.550 11.469 10529 9.707 8.985 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 8.422 7.843 7330 6873 6464 6097 15622 14.094 12.783 11.654 10675 9.823 4.328 4.151 3.988 8.488 7896 7372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4520 15.983 14.375 13.003 11.826 10.810 9.929 9.161 4.332 4.154 3990 16.330 14.643 13.211 11.987 10.935 10027 9.237 8.548 7.943 7409 6.935 6.514 6.136 5.798 5492 5.215 4.964 4.734 4524 4.335 4.157 8.602 7.984 7441 6.961 6.534 6.152 5.810 5.502 5223 4.970 4.739 4.528 16.663 14.898 13.406 12.137 11.051 10.116 9.307 4.531 7470 6.983 6.551 6.166 5.820 5510 5.229 4.975 4.743 4337 4.359 3994 16.984 15.141 13591 12.278 11.158 10.198 9.370 8.650 8.022 4534 6.566 6.177 5829 5517 5.235 4.979 4.746 8.694 8.055 7496 7.003 4.339 4.160 3.995 17.292 15.372 13.765 12.409 11 258 10.274 9.427 3.999 4.760 4544 4.347 4.166 6.642 6.233 5.871 5.548 5258 4.997 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7634 7.105 17% 18% 19% 20% 21% 24% 25% 3.902 3.776 3656 4.611 4439 4.278 4.127 3.985 3.851 3.725 4.362 4053 3.912 3.780 3.887 3992