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 divisions return on investment (ROI), which has exceeded 20% 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 salvage value) $ 250,000 $ 460,000 Annual revenues and costs: Sales revenues $ 300,000 $ 400,000 Variable expenses $ 140,000 $ 190,000 Depreciation expense $ 50,000 $ 92,000 Fixed out-of-pocket operating costs $ 75,000 $ 55,000 The companys discount rate is 18%.