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 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

The companys discount rate is 21%.

Use Excel or a financial calculator to solve any time value of money problems.

Required:

1.	Calculate the payback period for each product. (Round your answers to 2 decimal places.)

2.	Calculate the net present value for each product. (Round answers to the nearest dollar.)

3.	Calculate the project profitability index for each product. (Round your answers to 2 decimal places.)

4.	Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.)

Product B Product A $390,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $420,000 $190,000 $ 78,000 $ 90,000 $ 585,000 $ 500,000 $ 222,000 $ 117,000 $ 70,000