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.

He has computed the cost and revenue estimates for each product as follows:

The company's discount rate is $19\%.$

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor using tables.

This is a great review problem that reinforces the individual concepts covered using a comprehensive example.

To answer the questions, you must first calculate the annual net cash inflows as follows: Sales revenue minus variable expenses

minus fixed out$-$of$-$pocket operating costs.

Then you will calculate the following: payback period $($even flows$),$ net present value $($NPV$),$ internal rate of return $($IRR$)$ and

profitability index.

Required:

Calculate the payback period for each product.

Calculate the net present value for each product.

Calculate the internal rate of return for each product.

Calculate the profitability index for each product.

Req $1$

Req $2$

Req $3$

Req $4$

Calculate the payback period for each product. $($Round your answers to $2$ decimal places.$)$

Req $1$

Req $4$

Calculate the net present value for each product. $($Round your final answers to the nearest whole dollar amount.$)$

Net present value

Req $1$

Req $3$

Calculate the internal rate of return for each product. $($Round your percentage answers to $1$ decimal place i$.$e$.0\mathrm{.}123$ should be

considered as $12\mathrm{.}3\%.)$

Req $1$

Calculate the profitability index for each product. $($Round your answers to $2$ decimal places.$)$