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 Product B $ 210,000 $ 420,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $ 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 138-1 and Exhibit 130-2. 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 project 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, Lou Barlow would likely: Complete this question by entering your answers in the tabs below. The company's discount rate is 19%. Click here to view Exhibit 138-1 and Exhibit 13B-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 project 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, Lou Barlow would likely: Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Red 4 Req 5 Reg 6A Req 6B Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Project profitability index The company's discount rate is 19%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using 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 project 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, Lou Barlow would likely: Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Req 5 Req 6A Req 6B Calculate the simple rate of return for each product. (Round your answers to 1 decimal place i.e. 0.123 si as 12.3%.) Product A Product B Simple rate of return Req 4 Req6A > The company's discount rate is 19%. Click here to view Exhibit 13B-1 and Exhibit 13B-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 project 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, Lou Barlow would likely: Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Reg 4 Reqs Reg 6A Reg 68 Based on the simple rate of return, Lou Barlow would likely: Req 6B Accept Product A Accept Product B Reject both products
