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 $23\%$ each of the

last three years. He computed the following cost and revenue estimates for each product:

The company's discount rate is $14\%.$

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

Required:

Calculate each product's payback period.

Calculate each product's net present value.

Calculate each product's internal rate of return.

Calculate each product's profitability index.

Calculate each product's simple rate of return.

$6$a$.$ For each measure, identify whether Product A or Product B is preferred.

$6$ b$.$ 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.

EXHIBIT $14$B$-2$

Present Value of an Annuity of $$1$ in Arrears;

$1$

$$

$[$

$1$

$-$

$1$

$($

$1$

$+$

$$

$)$

$$

$]$

Periods $4\%5\%6\%7\%8\%9\%10\%11\%12\%13\%14\%15\%16\%17\%18\%19\%20\%21\%22\%23\%24\%25\%$

$10\mathrm{.}9620\mathrm{.}9520\mathrm{.}9430\mathrm{.}9350\mathrm{.}9260\mathrm{.}9170\mathrm{.}9090\mathrm{.}9010\mathrm{.}8930\mathrm{.}8850\mathrm{.}8770\mathrm{.}8700\mathrm{.}8620\mathrm{.}8550\mathrm{.}8470\mathrm{.}8400\mathrm{.}8330\mathrm{.}8260\mathrm{.}8200\mathrm{.}8130\mathrm{.}8060\mathrm{.}800$

$21\mathrm{.}8861\mathrm{.}8591\mathrm{.}8331\mathrm{.}8081\mathrm{.}7831\mathrm{.}7591\mathrm{.}7361\mathrm{.}7131\mathrm{.}6901\mathrm{.}6681\mathrm{.}6471\mathrm{.}6261\mathrm{.}6051\mathrm{.}5851\mathrm{.}5661\mathrm{.}5471\mathrm{.}5281\mathrm{.}5091\mathrm{.}4921\mathrm{.}4741\mathrm{.}4571\mathrm{.}440$

$32\mathrm{.}7752\mathrm{.}7232\mathrm{.}6732\mathrm{.}6242\mathrm{.}5772\mathrm{.}5312\mathrm{.}4872\mathrm{.}4442\mathrm{.}4022\mathrm{.}3612\mathrm{.}3222\mathrm{.}2832\mathrm{.}2462\mathrm{.}2102\mathrm{.}1742\mathrm{.}1402\mathrm{.}1062\mathrm{.}0742\mathrm{.}0422\mathrm{.}0111\mathrm{.}9811\mathrm{.}952$

$43\mathrm{.}6303\mathrm{.}5463\mathrm{.}4653\mathrm{.}3873\mathrm{.}3123\mathrm{.}2403\mathrm{.}1703\mathrm{.}1023\mathrm{.}0372\mathrm{.}9742\mathrm{.}9142\mathrm{.}8552\mathrm{.}7982\mathrm{.}7432\mathrm{.}6902\mathrm{.}6392\mathrm{.}5892\mathrm{.}5402\mathrm{.}4942\mathrm{.}4482\mathrm{.}4042\mathrm{.}362$

$54\mathrm{.}4524\mathrm{.}3294\mathrm{.}2124\mathrm{.}1003\mathrm{.}9933\mathrm{.}8903\mathrm{.}7913\mathrm{.}6963\mathrm{.}6053\mathrm{.}5173\mathrm{.}4333\mathrm{.}3523\mathrm{.}2743\mathrm{.}1993\mathrm{.}1273\mathrm{.}0582\mathrm{.}9912\mathrm{.}9262\mathrm{.}8642\mathrm{.}8032\mathrm{.}7452\mathrm{.}689$

$65\mathrm{.}2425\mathrm{.}0764\mathrm{.}9174\mathrm{.}7674\mathrm{.}6234\mathrm{.}4864\mathrm{.}3554\mathrm{.}2314\mathrm{.}1113\mathrm{.}9983\mathrm{.}8893\mathrm{.}7843\mathrm{.}6853\mathrm{.}5893\mathrm{.}4983\mathrm{.}4103\mathrm{.}3263\mathrm{.}2453\mathrm{.}1673\mathrm{.}0923\mathrm{.}0202\mathrm{.}951$

$76\mathrm{.}0025\mathrm{.}7865\mathrm{.}5825\mathrm{.}3895\mathrm{.}2065\mathrm{.}0334\mathrm{.}8684\mathrm{.}7124\mathrm{.}5644\mathrm{.}4234\mathrm{.}2884\mathrm{.}1604\mathrm{.}0393\mathrm{.}9223\mathrm{.}8123\mathrm{.}7063\mathrm{.}6053\mathrm{.}5083\mathrm{.}4163\mathrm{.}3273\mathrm{.}2423\mathrm{.}161$

$86\mathrm{.}7336\mathrm{.}4636\mathrm{.}2105\mathrm{.}9715\mathrm{.}7475\mathrm{.}5355\mathrm{.}3355\mathrm{.}1464\mathrm{.}9684\mathrm{.}7994\mathrm{.}6394\mathrm{.}4874\mathrm{.}3444\mathrm{.}2074\mathrm{.}0783\mathrm{.}9543\mathrm{.}8373\mathrm{.}7263\mathrm{.}6193\mathrm{.}5183\mathrm{.}4213\mathrm{.}329$

$97\mathrm{.}4357\mathrm{.}1086\mathrm{.}8026\mathrm{.}5156\mathrm{.}2475\mathrm{.}9955\mathrm{.}7595\mathrm{.}5375\mathrm{.}3285\mathrm{.}1324\mathrm{.}9464\mathrm{.}7724\mathrm{.}6074\mathrm{.}4514\mathrm{.}3034\mathrm{.}1634\mathrm{.}0313\mathrm{.}9053\mathrm{.}7863\mathrm{.}6733\mathrm{.}5663\mathrm{.}463$

$108\mathrm{.}1117\mathrm{.}7227\mathrm{.}3607\mathrm{.}0246\mathrm{.}7106\mathrm{.}4186\mathrm{.}1455\mathrm{.}8895\mathrm{.}6505\mathrm{.}4265\mathrm{.}2165\mathrm{.}0194\mathrm{.}8334\mathrm{.}6594\mathrm{.}4944\mathrm{.}3394\mathrm{.}1924\mathrm{.}0543\mathrm{.}9233\mathrm{.}7993\mathrm{.}6823\mathrm{.}571$

$118\mathrm{.}7608\mathrm{.}3067\mathrm{.}8877\mathrm{.}4997\mathrm{.}1396\mathrm{.}8056\mathrm{.}4956\mathrm{.}2075\mathrm{.}9385\mathrm{.}6875\mathrm{.}4535\mathrm{.}2345\mathrm{.}0294\mathrm{.}8364\mathrm{.}6564\mathrm{.}4864\mathrm{.}3274\mathrm{.}1774\mathrm{.}0353\mathrm{.}9023\mathrm{.}7763\mathrm{.}656$