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 (RON, which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product Products $ 370,000 $ 570,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 400,000 $ 180,000 $ 74,000 $ 88,000 $ 480,000 $ 214,000 $ 114,000 $ 68,000 The company's discount rate is 20% Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each droduct. 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: Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg GA Reg 6B Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product A Products S 23,875 $ 27.2633 Not present value Calculate the internal rate of return for each product. (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%) Product A Product B Internal rate of return % 1.0 % Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 400,000 $ 180,000 $ 74,000 $ 88,000 $ 480,000 $ 214,000 $ 114,000 $ 68,000 The company's discount rate is 20% Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor us 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. 66. Based on the simple rate of return, Ldu Barlow would likely: Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Req 4 Real Reg 6A Reg 68 Regs Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B 1.05 Project profitability Index 1.07
Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg 5 Reg 6 Req 6B For each measure, identify whether Product A or Product B is preferred. Net Profitability Payback Internal Simple Present Rate of Rate of Index Period Value Return Return
