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 22% 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) $ 380,000 $ 525,000 Annual revenues and costs: Sales revenues $ 410,000 $ 490,000 Variable expenses $ 186,000 $ 218,000 Depreciation expense $ 76,000 $ 115,000 Fixed out-of-pocket operating costs $ 89,000 $ 70,000 The company's discount rate is 20% Click here to view Exhibit 148-1 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 6. Based on the simple rate of return, which of the two products should Lou's division accept? 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 66. 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 Req3 Req4 Reg 5 Reg 6 Req6B Calculate the payback period for each product. (Round your answers to 2 decimal placer Product B Payback period Product A years years Req 2 > Heip Sove & EKIT 2. LOLLUIDE UN TELPRESCI Vore repro 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 is preferred. 6b. Based on the simple rate of retum, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Reg 1 deg 2 Req3 Reg 4 Reg 5 Req 6A Reg 6B 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 OVE O EXIT RUCTE COCIO 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. 66. 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 Rello Reg4 Regs Reg 6 Re 68 Calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place i.e. 0.127 should be considered as 12.3%) Product B Product 96 Intemal rate of return 2. LICUIQLCLIC HICE PICSCHIL VIUC TUI CACH prouce 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 Reg 6B Reg 3 Reg 4 Reg 5 Req 6A Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Profitability index 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 Reg 6B Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place le. 0.123 should b considered as 12.3%.) Product A Product B % % Simple rate of retum MUR 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 60. For each measure, identify whether Product A or Product 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 Reg4 Reg 5 R6A Reg 60 For each measure, identify whether Product A or Product B is preferred. Net Present Profitability Payback Internal Rate Simple Rate of Value Index Period of Return Return 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 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 Red 3 Reg 4 Reg 5 Reg SA Rog 68 Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A Accept Products Reject both products
