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 25% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: Annual revenues and costs: Product A Product B Cost of equipment (zero salvage value) $ 370,000 $ 530,000 $ 400,000 $510,000. $ 180,000 $ 250,000 $ 74,000 $ 106,000 Fixed out-of-pocket operating costs $ 85,000 $ 72,000 Sales revenues Variable expenses Depreciation expense The company's discount rate is 19%. Click here to view Exhibit 12B-1 and Exhibit 12B-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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 21 Req 3 Req 4 Req 5 Req 6A Req 68 Calculate the payback period for each product. (Round your answers to 2 decimal places.) Payback period Product A Product B years years Req 2 > ces 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product A Product B Net present value Hint eferences IS 19%. Click here to view Exhibit 12B-1 and Exhibit 128-2, 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place i.e. 0.123 shou be considered as 12.3%.) Internal rate of return Product A Product B % Depreciation expense Fixed out-of-pocket operating costs The company's discount rate is 19%. $ 180,000 $ 74,000 $ 250,000 $ 106,000 $ 85,000 $ 72,000 Click here to view Exhibit 12B-1 and Exhibit 128-2, 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Profitability index Product A Product B 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 21 Req 3 Req 4 Req 5 Req 6A Req 6B Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Product A Product B Simple rate of return % 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period Internal Rate of Return Simple Rate of Return tables. EXHIBIT 12B-1 Present Value of $1; 1 hps Jects-of-media.education.com/Media/Connect Production/account/EABL_128_1M Periods 4% 5% 6% 7% 1 2 0.962 0.952 0.943 0.935 0.925 0.907 0.890 0.873 8% 0.926 9% 10% 11% 3 4 6 7 8 0.760 0.711 0.665 0.623 0.731 9 10 11 0650 0.585 0527 12 13 14 15 16 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0,718 0.706 0.694 0.683 0.672 0.661 0.650 0640 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0537 0.524 0512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0451 0437 0423 0410 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0519 0.497 0476 0456 0437 0.419 0402 0386 0.370 0.355 0.341 0328 0,790 0.746 0.705 0.666 0,630 0.596 0.564 0.535 0.507 0.480 0456 0432 0.410 0.390 0.370 0.352 0335 0319 0303 0.289 0.275 0.262 0.583 0.547 0.513 0.482 0.452 0425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0235 0.222 0.210 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0322 0.295 0270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0475 0.429 0.388 0.350 0.317 0287 0.261 0237 0.215 0.195 0.178 0.162 0.148 0.135 0.125 0.112 0.103 0.094 0086 0.625 0.557 0.497 0,444 0.397 0356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0092 0.083 0.076 0.069 0601 0530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0084 0.075 0.068 0061 0.055 0577 0.505 0442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0099 00SS 0.078 0.069 0.062 0055 0.049 0.044 0.555 0.481 0417 0.362 0.315 0.275 0.239 0209 0.183 0.160 0.140 0.125 0.108 0095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0534 0458 0.394 0.339 0.292 0.252 0.218 0.188 0.16 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.012 0.028 0.513 0436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0052 0.045 0.039 0.034 0.030 0.026 0.023 0.494 0416 0.350 0.296 0.250 0.212 0.180 0.153 0.1.30 0.111 0095 0.081 0.069 0.059 0.051 0044 0038 0.032 0.028 0.024 0.021 0.018 0475 0396 0.331 0.277 0.232 0.194 0.164 0.1.38 0.116 0.098 008) 0.070 0.060 0051 0043 0037 0.031 0.027 0023 0020 0017 0014 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.08 0.07 0.001 0.051 0.043 0037 0031 0.026 0022 0.019 0016 0014 0012 0439 0359 0.294 0.242 0.199 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0018 0015 0013 0011 0.009 0422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0406 0.326 0.262 0.211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0390 0310 0.247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0035 0.028 0.023 0019 0015 0.013 0.010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0092 0.074 0.059 0.047 0.038 0.030 0024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.361 0281 0.220 0,172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 17 18 19 20 21 22 23 24 25 26 27 0.060 0.047 28 29 30 40 0.208 0.142 0.097 0.067 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.333 0.255 0.196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 0243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0017 0014 0.011 0.008 0.308 0.231 0.174 0.131 0.099 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0075 0.057 0044 0.033 0.026 0020 0015 0012 0.009 0.007 0.022 0.015 0.046 0.032 0.011 0.008 0.005 0.004 0.001 0.003 0.000 0.000 0.002 0.001 0.001 0.000 0.000 0.000 EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears 11-((1+r)')) 2 3 4 5 6 7 6.002 Periods 4% 5% 0.962 0.952 0.943 0.935 0.926 1.886 1.859 1.833 1.808 1.783 2.775 2/723 2673 2624 2.577 3.630 3346 3.465 3387 4452 4.329 4212 4.100 5.242 5076 4.917 4.767 5.786 5582 5389 6% 7% 8% 3.312 3.993 4623 5206 8 6.733 9 7435 7.108 6802 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 15% 16% 17% 18% 19% 20% 21% 22% 9% 10% 11% 12% 13% 14% 0.917 0909 0.901 0893 0.885 0.877 0.870 0.862 0855 0.847 0.840 0.833 0.826 0.820 0.813 0806 0800 235 24% 25% 1.759 1.736 1713 1.690 1668 1.647 1.626 1605 1585 1566 1547 1.528 1509 1.492 1.474 1.457 1.440 2531 2487 2444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2074 2.042 2011 1981 1952 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2743 2690 2639 2589 2.540 2.494 2448 2.404 2362 3.890 3.791 3.696 3.605 3517 3.433 3.352 3274 3199 3127 3058 2991 2.926 2.864 2.803 2.745 2689 4.486 4355 4.231 4311 3.998 3889 3.784 3.685 3589 3.498 3.410 3326 3.245 3.167 3.092 3.020 2.951 5.033 4868 4.712 4.564 4423 4.288 4.160 409 3922 3812 306 3.605 3.508 3.416 3327 3242 3.361 6.463 6210 5971 5.747 5535 5.335 5.146 4968 4.799 4.639 4.487 4344 4.207 4078 3.954 3.837 3.726 3.619 35183421 3329 6515 6.247 5995 5.759 5537 5328 5.132 4946 4.772 4607 4451 4303 4.163 4031 3.905 3.786 3.673 3366 3.463 8.111 7.722 7360 7.024 6710 6418 6.145 5.889 5.650 5.426 5.216 5.019 4833 4659 4494 4339 4.192 4054 3923 3.799 3.682 3571 8.760 8.306 7.887 7.499 7.139 6805 6.495 6207 5.938 5.667 5453 5.234 5029 4.836 4656 4486 4.327 4.177 4035 3.902 3.776 3656 9.385 8863 8.384 7.943 7536 7.161 6814 6492 6.194 5918 5600 5421 5.197 498 4.79) 4.611 4.439 4.278 4.127 3.985 3851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6424 6.122 5.842 5.583 5.342 5.318 4910 4715 4333 4.362 4.203 4053 3.912 3.780 10563 9.899 9295 8.745 8.244 7786 7367 6982 6628 6302 6002 5.724 5468 5229 5008 4302 4611 4432 4.265 4.108 3962 3824 11.118 10.380 9.712 9.108 8.359 8.061 7.606 7.191 6.811 6.462 6.142 5847 5575 5324 5092 4876 4675 4489 4.315 4.153 4001 3859 11.652 10838 10.106 9.447 8851 8313 7.824 7.379 6974 6.604 6.265 5954 5668 5.405 5.162 4938 4.750 4536 4.357 4.189 403) 3.887 12.166 11274 10.477 9.763 9.122 8544 022 7549 7.120 6.729 6.373 6047 5.749 5475 5.222 4990 4.775 4576 4391 4219 4059 3910 12.659 11.690 10.828 10.059 9.372 8.756 8201 7.702 7250 6840 6.467 6.128 5818 5534 5273 5033 4812 4.608 4419 4243 4080 3.928 13.134 12.085 11.158 10.336 9604 950 365 7809 7.66 6938 6.550 6.198 5877 5584 5316 5070 4843 4635 4.442 4.263 4097 3942 13.590 12.462 11.470 10.594 9818 9.129 8.514 7.963 749 7025 6.623 6.259 5929 5628 5.353 5.101 4370 4.657 4460 4279 4.110 3954 14.029 12.821 11.764 10.836 10.017 9.292 8649 8.075 7.562 7.102 6.687 6312 5973 5665 5.384 5.127 4.891 4675 4476 4.292 4.121 3963 14.451 13.163 12.042 11.061 10.201 9442 8.772 8.176 7645 7.170 6.743 6359 6011 5696 5410 5.149 4509 4.590 4438 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8883 8.266 7718 7230 6.792 6.399 6044 5.723 5:432 5.167 4.925 4.703 4499 4311 4137 3.976 15.247 13.799 12.550 11.469 10.529 907 8985 348 7.784 7.283 6835 6434 6073 5.746 5451 5.182 4.937 4.713 4.507 4.318 4.143 1981 15.622 14.094 12.783 11.654 10.675 9823 9077 8422 7843 7.330 6873 6464 6097 5.766 5.467 5.195 4.94K 4.721 4514 4.323 4.147 3065 15983 14375 13.003 11.826 10.810 9.929 9.161 8488 7896 7372 6906 6491 6318 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8548 7.94) 7409 6915 6514 6.136 5.79 5.492 5215 4.964 4734 4524 4332 4.154 3990 16.663 14.898 13.406 12.137 11.051 10.116 9.307 602 7984 7441 6961 6534 6.152 5810 5.502 5.223 4970 4759 4.528 4.335 4.157 3992 16.984 15.141 13.591 12.276 11.158 10.198 9.370 8.650 8.022 7470 6983 6.551 6.166 5320 5310 5229 4.975 4.743 4531 4337 4159 3994 17.292 15.372 13.765 12.409 11 258 10274 9427 8.694 8055 7496 7003 6566 6.177 5829 5517 $235 4.979 4.746 4534 4339 4.160 3995 19.793 17.159 15.046 13332 11.925 10.757 9.779 8951 244 7654 7.105 6642 6233 5871 5548 5.258 4997 4760 4544 4347 4.166 3.999