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 ratses 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 Product Product Initial investment Cost of equipment (zero salvage value) $ 370,000 $530, Annual revenues and costs Sales revenues $400,000 510,000 Variable expenses $ 180,000 $ 250,00 Depreciation expense $ 74,000 $106.00 Fixed out of pocket operating costs $ 35,000 $ 72,000 The company's discount rate is 19%, Click here to view Exhibit 143-1 and Exhibit 148-2 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. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Req 6B calculate the payback period for each product. (Round your answers to 2 decimal places.) Prontuata Product Payback period years Tyears Reg 1 Reg 2 Reg 3 Reg 4 Req 5 Req 6A Req 6B Calculate the net present value for each product. (Round your final answers to the nearest whale dollar amount) Product Product Net present value Reg 1 Reg 2 Reg 3 Req4 Req 5 Reg 6A Req6B Calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place le 0.123 should be considered as 12.3%.) Product Product B Internal rate of return % % Reg 1 Reg 2 Reg 3 Reg 4 Req5 Req 6A Req 6B Calculate the profitability Index for each product. (Round your answers to 2 decimal places.) Product Product Profitability Index Reg 1 Reg 2 Reg 3 Reg 4 Regs Req 6A Reg 68 Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place le. 0.123 should be considered as 12.3%.) Product Products Simple rate of rotut Reg 1 Reg 2 Req Reg Reg 5 Reg 6A Reg GB For each measure, identify whether Product A or Product B is preferred. Na Prosem Volun Probably Index Pay Period nemalam simple Rate of Roturn Raum Reg 1 Reg 2 Reg 3 Req4 Reg 5 Reg 6A Req 60 Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A O Accept Product B OReject both products
