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 21% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B $ 210,000 $ 420,000 Initial investment Coat of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Tixed out-of-pocket operating costs $ 290,000 $ 138,000 $ 42,000 $ 74,000 $ 390,000 $ 186,000 $ 84,000 $ 54,000 The company's discount rate is 19%. Click here to view Exhibit 14B1 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? 105 Pences 1 2 3 4 5 6 7 9 10 11 14 15 16 17 55 0% 9 10% TY 28 134 15 17 187 200 21 225 23 201 25% 0.962 0952 0913 0935 0.926 0907 0909 090 0893 0.885 0877 0.870 0362 0855 08470840 0833 0826 0320 083 0805 0.800 9.925 0.907 09900173 0857 0342 0626 0.012 0797 0783 0789 0756 0743 0731 0.7180.706 0.094 0.663 0.672 0661 0650 0.600 0.809 0964 0.340 0.8160794 0172 0.751 0731 07120693 0675 0.658 0641 0624 06090593 0579 0554 0551 0.537 0524 0.512 0.855 0.023 0792 0703 0.735 0708 0.680 0.69 0.638 0.613 0592 0.572 0542 0.534 0.54 0.499 0.482 04670451 0.437 0.423 0.430 0822 0784 07470713 0.6 0.050 0621 0.593 0567 0543 0.59 0.497 0.476 0.456 0.437 0.419 0.402 0.336 0.370 0.355 03410328 0.790 07460705 06060630 0.5 0.564 0535 0.507 0.430 0.456 042 04100390 0370 0.352 0335 0.319 0303 0209 0275 0202 0.750 0.71 0.665 0.623 0.583 0.50 0.50 0482 0.452 0425 0.400 0.376 0354 0333 0314 0.296 0.279 0263 0.2490235 0222 0.250 0731 0672 0627 05820540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0285 0.266 0249 0233 0.21 0.204 0191 0179 0160 070306450.592 0.54 0.500 0.400 0.424 0.391 0.361 0333 0.308 0.284 0.263 0243 0.225 0209 0194 0130 0.167 0155 0.144 034 0.69806140558 0508 043 0422 0.356 0.352 0.322 0295 0.270 0247 0.227 0200 0191 0.176 0562 0149 0.007 01260116 0:107 0.650 0.505 0.52704750429 0.388 0.350 0.3170207 0201 0.227 02150195 01710162 OS 0135 0123 0112 0103 0094 0.086 0.625 0557 099704440397 0.356 0.319 0.206 0257 021 02000187 0:1600152 0037 0124 01120102 0.092 0.003 0.0200009 0.001 0.530 0469 0.45 0.38 0.326 0.250 0.250 0.229 0204 0182 0163 04450100110 0104 0090 0004 0.075 0.005 0.001 0055 0.577 0505 0442 0.388 0.340 0.299 0.263 0.232 0.205 0181 0100 0541 0.125 m 0.099 0098 0.078 0009 0.062 0055 0.029 004 0.556 0.431 040 0362 0:35 02750230 02090113 0.1000340012301000095 0004 0.00 0.005 0.05700510045 00100035 0534 04580304 03090292 0252 0.21801880163 01 0123 0102 0093 0.001 0071 0062 0054 00120042003600320028 050 0.00 0.37 0.17 0270 02019001700146 0125 0100 0000 0000 0000 0000 0.052 0045 0000 0084 0030 0026 0022 049404160350 0.296 0.250 0.21201000153 0130011 0095 0000 0000 00500051 004 003 001200200024 0.021 00 0.475 0.000371 0.277 0232 0140164 0138 0116 0090003 007000600051 000 000 000022 0.02300200017 0.014 0.456 0.37 0012 0.250 02150178 014901247 0904 007 0073 0.001 0.051 004 0.037 0.001 0026 0.022 00100160014 0012 0.40 0.550 0.294 0242 01990164 005 0112 008 007 0064 0.053 0044 0.037 0.01 0.0200022 0.018 0015 000 000 000 0.422 0542 021 02260304 015001230101 0033 0008 0.056 0046 0.030 003200260022 0000150013 0.01 04060326 0.262 02110170001011200910074 0000 0000 0010 0033 0.027 0.022 00180015001200100009 0.0070006 0000 0000 0.390 0:002420170158 012601020002 0.006 0053 0043 0035 0020 0023 001 0.015 0.00 0.00 0.000 0.00700060005 0.375 0295 020 0154 054601160092 0074 005 0047 0033 0030 0024 0.0200.0160.013601000090002 0006 0005 0005 0.361020102200172 01350106 0004 0.006 0053 0042 0.033 0026 0.021 000 00140010009 0.007 0006 0.005 00040003 0.347 0.268 0207 0901 0125 0098 0000 0000 0047 00370029 0023 00 00 001 0.009 00070006 0.005 0.004 0.003 0.002 0.333 0255 0196 01500116 0000 0000 0054 0042 0000 0026 0.0200016, 0012 0010 0008 0.000 0.005 0.004 000300020002 0221 020 0195 01 0107 0002 00600018 0.037 0029 0.022001700940011 0000 0000 0005 0004 0.000 0.00200020002 0.308 02310114 01 009900750057 004 000 0026 0.020 00150012 0009 00070005 0.004 0000 0000 0002 0.002 0001 02000142 009700070046002 0022 000 000 0000 0.005 0.004 0000 0002 0.001 0.001 0.001 0000 0000 0000 0000 0000 19 20 21 22 20 24 25 20 22 29 30 40 DHT140-2 Present Value of an Annuity of St in Arrows; Periods 2 3 4 5 5 1 3 9 10 11 13 14 15 16 12 45 56% 7% 89 95 100 12 O 159 189 17 19 20% 211 23 249 250 0.9620952090309350926 0907 09090901 0.893 0885 0770870 0162 0555 0347 0.840 0.833 0026 0.12008003080000 1.836 1859 1833 1800 1780 1759 1736 170 1690 1663 164 1626 1605158515661547 1520 1509 1492 1474 1457 1440 2775 2723 2.673 2624 2.577 2531 232 2444 2.402 2361 2322 2283 2246 2210 2174 2840 2006 2074 2042 2011 1981 1952 1630 3516 465 3337 200 3240 3.101102 3037 2974 2954 2055 2.798 273 2690 2639 2589 2540 2494 2448 2304 2362 43294212 3.993 3590 391 3696 1605 3517 3433 3352 3.274 21993127 3058 2991 2,926 2564 2803 2745 2.689 5.2425070 4917 4757 4623 40 4355 4231 411 3998 3899 3.784 3685 3.589 3490 3410 3.326 3245 3367 3:092 3020 2.951 6002 5780 55825.389 5206 5033 4368 4712 4564 4423 4.289 4560 4.039 39223.812 37063605 3.508 3.45 3327 32423161 073 8.400 6250 51921 5747 5.535 5335 51461968 47994639 4487 4346 4.207 4070 3.954 3837 3726 3619 3518 34211329 2005 2108 5.302 6.515 6242 5995 575 5537 5328 5132 49464772 4007 4451 43034383 4031 905 370636733566 3.463 2711 7722 7360 7024 0.10 6413 6545 5.899 5650 $426 5 236 5019 480 4659 4294 4319 4192 405 3923 799 352 3571 8.750 3.306 2007 7499 7139 6.805 5495 6.207 5938 5687 5 453 5234 5.029 48364656 4436 4327 47 4095 3.902 3776 3656 9385 3.36083547963 7536 7361 6.814 6.492 6194 5.915 5660 54215197 4.988 4793 4611 4489427341273.985 3.8512725 9.986 9394 8853 3.358 7904 7407 7102 6750 6.424 6122 58425583 5.342 5110 1910 475 4.523 4362 4200-4053 39123780 10567 9.999 9.295 3.745 8.244 7780 7.367 6.902 6628 6302 6002 5724 5.468 5.229 5.000 4.802 4011 4.432 4.265 4108 3.962 3.824 TL13 103009702 9308 3558 LOT 76067191 681 6.462 612 58475575 5324 5092 4.876 4575 289 4.35 4153 400+ 3.959 10052 10.38101069847 285 8313 7824 7379 6974 6604 6205 5954 5660 5.405 5162 4933 47304536 4357 4109 4033 3532 12166 1127410479763 9:02 154 30227549 7120 67296.373 6.047 5749 5.47552224990 4775 4.576 43914219 4059 3910 126591169009201005993728756 3.20127027250 6.340 6.467 6120 5818 5534 5.2735033 48124600 4419 420 40003928 1334 1206558 10.336 9.604 950 365283973666935 6.550 6.198 5877 5584 5.316 5070 4843 4635 442 423 4097 3.942 32530 1240211470 10594 9.84 9129 054479607469 70256,623 6.250 5.929 5.623 5353 5101 4.870 4657 4.480422940 3954 140201202171754 1083000179292 1649 1075 2562 2102 6,687 6.712 972 5665 5384 5127 4991467544764292 4.121 1983 14.451 116 12.042 1061 10.2019.442 87728.1767645 2170 67036059 0.011 5.696 5.410 55494909 4690 4430 430241303970 14570408230311272037 9.500 88832667755 72306.79263996.044 5722 54325367 49254703149931 407 3.976 1524779 255011469105290707 8.905 3482754 7.283 6835 6.0346.073 5746 5.451 5102 4937478450743184543 15.672 094 12700 1654 10,675 9.823 2.981 9.077 1422 733 73306.873 6.4646097 5706 5467 5195494847214514 4237 3.985 15.903143731800311826 1010 0.923 1.4 20967372908 6,4919 57835.4805 206 49564725 4520 4328 4.15 3903 16301601211 129071093510027 9237.548 790 7409 935 65146136 57985492 5.215496447344.524 43324154 1990 1666) 14.696 3.406 2.32 1105110116 9.307 0.002 79047411 0.0016534 6152 5810 5502 52234970 4739452842354157 16984151 1191 2.278 TU 10.1980.370 8650 3.022 7470 6.933 6551 6506 5820 5510 5229 4975441457143074150 17292 15:32 16 240917253 10.274 907 3594 055 74907003 2994 6.566 177 5.829 551752354979474045944309 4160 3.995 1993 7150 1500611122510757 9.779951324476347105 65426233 55715585258 499747604544347 4.166 3.999 10 20 21 22 23 24 25 26 27 29 30 20 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 Reg 2 Req3 Req 4 Req 5 Req 6A Req 6B Calculate the payback period for each prodct. (Round your answers to 2 decimal places.) Product A Product B Payback period years years Complete this question by entering your Reg 1 Rey 2 Reg 3 R Calculate the net present value for each product Product A Product B Net present value
