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 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B $ 310,000 $ 510,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $360, eee $164,000 $ 62, eee $ 81, eee $ 460, eee $ 214, eee $ 102,000 $ 65,000 The company's discount rate is 18% Click here to view Exhibit 14B-1 and Exhibit 14B-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? EXIBIT HB-1 Present Value of $11(1) 69 966 ROSS0980 OUTOLSOSESO 1680 1060 6060 EIRO 1990 190 E1909190 6590 STO THOSSEO OLEO 9 210 OLIO Periods 49 59 79 109 119 139 149 159 1696 1996 1 0.562 0.952 00 1896 1996 2095 0.93 0.926 0.917 2194 2296 239 149 255 2 0.925 0.907 025400X3026080 0.890 0.873 08570842 0826 0.06 OS 0.812 0.797 10.73 0.769 0.756 1 0.589 0.864 0.743 0.31 OTIS 0.706 0.691 0672 200 0.816 0.794 0.772 0751 0.650 06 0.731 0.7120.69 0.675 0.655 4 0.6410,634060 0.593 0.855 0.823 0.792 0579 0.566 0.763 0.735 0708 0.551 0.537 0.524 0.5 0.683 05920572 053205340516 0.499 S 0.522 0482 0467 DESI 0.41 0.784 0.747 0.713 0681 0. 0.6500621 0.5930-5670543 05190.497 04760.456 0.437 0.419 0.402 0.136 0.790 0.746 0705 0.666 0.6300 596 01564 0.335 0.5070.400.456 0.412 0352 7 04100390 0.370 0335 0.319 0.760 0.711 0303 0289 0.23503 0.665 0.6 0.58305470313 0482 0.4520425 0.400 0.376 0.154 0.233 0114 0.296 0.29 0.263 0249 8 0235 0.22 02 0.731 0.677 0.627 0582 0.340 0.502 0467 0.434 0.4040376 0.3510327 0.305 0.255 0.266 0.2490 233 021802010 191 9 0.703 0645 0592 0544 0.500 0.460 0424 0,391 0.36103330.308 02302633 0243 0225 0.209 0.19 0.18 0.167 0.155 0.14 0.1 10 0.676 0.614 0338 OSOS 0.463 0412 0386 0.35203221029510270 0.2476237210,208 0.19 0.176 1620.149 0.132 0.126 0,116 0.10 11 0.6S002385 0.527 0.475 0.429 038 01150 0317 0.257 0.261 0.237 0.215 0.1951 0178 0.162 0.1480 1350 120 112 0.103 0.09800 12 0.625 0:557 0.497 0:44+ 0.397 0.356 0319 0.286 0.257 02231 0.08 0.187 0.168 0.12 0.137 0.1240.112 0.102 0.092 0083 0.0760.00 13 0.60 0530 0.469 0415 0.368 0.326 0290 0.2580 2902040.152 0.163 01450,130 0.116.104 0.093 0.0840.075 0.068 0.051 14 0.572 0442 038 0340 0.19 0.263 0232 0.2050181 0.160 0.14 0.125 0.09 0.08300781009 0.0620003 0.400 15 OSSS 0.48 0.41 0362 03150273 0.239 0.2090120160 0.1400.1230.1030.095 0.08 0.07 0.065 0.097 0.040 0.0 16 0314 0458 0394 0339 0.292 0232 0218 0.188 0.163 0.141 0123 0.107 0.093 0.05 0.071 0.002 0.05 0.04 0,036 0.033 0.0 17 0313 0.436 03170270 0210.1980.1700.146 0.125 0.105 0.093 0.680 0.06900600.0520045 0039 0.034 0.030 0.026 0.03 18 0494 04160350 0.25 020 0.153 0.130 0.095 0051 0,069 0.0590051 0.03 0.012 0.025 0.021 0.0 19 0.475 0.196 01331 0.270.220.194 0.16 0.138 0.116 0.098 0.08 0.0100 0.05! GOL 0037 0.031 0.027 0.02 0.020 0.017 OLO 20 0.456 0.37710012 DES 017 0.124 0.01 0.087 01073 0.061 0.051 0.043037 0.631 0.026 0022 0.019 0016 0.014 00 21 0.439 0290 0.359 0.242 0.199 0.164 01350112 0.093 01077 0.066.053 0.014 0.057 0.031 00 0.0260022 0.01 0.0158 0.013 0.01 22 0.422 0342 0.275 0.226 0.1840.1500123 0.101 0.016 0.035 0.000320018 0.015 0.013 0011 000 DO 23 04016 0.262 02326 0.170 0.135 0.091 010-19 2010 0.060 0 0.00 00330027 0022 0018 0.03 02 0.010 0.0090.007 24 0.190 0310 01247 0.102 0.197 0.15 0.126 0.020 DON 00066 0.053 0023 00190015 0.03 0.00 0.008 0.007 0.006 0175 0.25 0005 0233 000 0.154 0 146 0.116 0.092 0.0590047 0.074 0.038 0,030 0.024 0.0200016 0.01300100009 0.007 0.006 00 SOSO Sto 1500 CHOO ILEO CO 010 110 HO COO SICO 610 NO 5900 95070 DO TITO CITO 100 100 se EXHIBIT 11R-2 Present Value of an Annuity of S1 in Arrears: LT10111 91 968 Periods 1 2 3 1586 SON GOS! 9 LE CE OLE CICE LIOT OICE 06 951 WONA 111 SOCIATE DOW 3 6 2 8 6 NOSS TOP 10 11 12 13 19 1 ST 6 5. 69 79 996 109 1296 139 149 154 169. 0.963 175 1896 1991 219 24 224 2 0.952 0943 0.935 0.936 0917 0.9090901 0.893 OSS 077 0870 0.86 0.855087084 0830.8260.8.2003 0.1060 1.859 1.783 1759 17361371381.6901.668 167 14.6261.003 115 1 566 154 15 2.775 2.733 1.4921414571 2673 2.6242373 2531257 2402112361 222 223 2246 2210 2174 2140 2106 29742042 2011 1981 1 1610 TEC 1465 1 3103 3031 2014 2014 2055 27282732.69012619 2599 252 100 2.500 3496012 JOM w 35123303520202.199 3123055199112920 5.242 5.070 2767 1623 4355 4331 3.99837893786 37683 JIS 3.49839410 302613.345 316 6.00257865323956206 503584.7124563 1030913922 11312320 3608 150 341627223 67 6.46 6210 59713747 3333333333146 4.965 4.79 461914.48743454.207 4.0783.956357 3736 3619 1421 7415 72103 5.995 51799 555375.3985124041424343033163 3.905 3.786 17.72 7.360 70346710 6415 61451560 3650 SA321601940639 4:39 194054192982 8.76006 75 49 7.159 6.0 6.95 16.302 391 $16575445381523303645445543271774035 19021276 9.383 790186 74161 68146449219430183650 319 47 4,439 477847127 29 TRI 9.986 9194 85 7.904 748771016.750 64424635802538315342010147153.553 4362420052 105619.99 9.295 21 81244 7.78673676962 6678 6300 600 5.72446830 4800 4611 4.432 4.765 4.1962 TEIS 109.712 352 8061 775069191 6811 64621612213849 13573535024576 467544594315415001 11.652 10.838 10.1069,467 8 313174737969746.0616263 39545.665 5.4016240184710 4 536 4515741103 12.166 11274104729.763 5544 302275497.120 67296 3706047157093.4153249204775 45764191 4059 1265911.690 10.53810105919.173 15601 72702750 6206.46763838165.53435231013 4.608 1313413083 158 1033600 1950 7397166 995635061981357733541531607033 361 4442 100 13590 12.462 11 10 599 09:55 13 83147963 7.469 770056626.259 1599562853353101 450 4657 4460241103 14.029 1282111.7601033610029293 69801 77563 7A10266571631250925568505152591 105 44764.92 4.121 14.451 13.163 1201061 10201942 728 1767643 7270673659 60113654109309 6792639 14.857 13.489 12.303 1172 10.3719350 GO532 5.167 4703 4.199311 4.17 15 247 13.799 12.350 1.469 10:5299.707 RE 53487787768556.434607374654515.1829374.13 4507) 418 4.143 15.622 14.094 12.783 1654 10.675293967222228933733036.8736.564 6.09 5.766 467 5.1959 4721 40514430 447 ROVOCATENTOS 1111 ST 15 16 DEL SOTTOPS CIST OROTHE 18 19 20 21 22 23 24 189 1 SS DOE+ DET OLE SO SELE 99233 SC DODO VISUAL 5873