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 divisions 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 Initial investment: Cost of equipment (zero salvage value) $ 310,000 $ 510,000 Annual revenues and costs: Sales revenues $ 360,000 $ 460,000 Variable expenses $ 164,000 $ 214,000 Depreciation expense $ 62,000 $ 102,000 Fixed out-of-pocket operating costs $ 81,000 $ 65,000 The companys discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. Required:

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.