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 $20\%$ 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$)$ $ $290,000$ $ $490,000$

Annual revenues and costs:

Sales revenues $ $340,000$ $ $440,000$

Variable expenses $ $154,000$ $ $206,000$

Depreciation expense $ $58,000$ $ $98,000$

Fixed out$-$of$-$pocket operating costs $ $79,000$ $ $59,000$

$1.$ Calculate Payback Perod

Payback Period Product A Product B

$?$

$?$

$2.$ Using Excel, calculate the net present value for each product. $($Round your final answers to the nearest whole dollar amount.$)$

Net Present Value Product A $?$

Net Present Vlaue Product B $?$

$3.$ Caculate Internal Rate of Return

IRR Product A Product B

$\%\%$

$4.$ Calculate Profitability Index

PI Product A $?$ Product B $?$

$5.$ Calculate Simple Rate of Return

SRR Product A Product B

$6.$ Which Product is Preferred

NPV Profitability Index Payback Period IRR

A or B A or B A or B A or B