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:

Product A Product B

Initial investment:

Cost of equipment $($zero salvage value$)$ $ $390,000$ $ $585,000$

Annual revenues and costs:

Sales revenues $ $420,000$ $ $500,000$

Variable expenses $ $185,000$ $ $222,000$

Depreciation expense $ $78,000$ $ $117,000$

Fixed out$-$of$-$pocket operating costs $ $90,000$ $ $70,000$

The company$$s discount rate is $21\%.$

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

Required:

$1.$ Calculate each product$$s payback period.

$2.$ Calculate each product$$s net present value.

$3.$ Calculate each product$$s internal rate of return.

$4.$ Calculate each product$$s profitability index.

$5.$ Calculate each product$$s simple rate of return.

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

EXHIBIT $14$B$-2$

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

$1$

$$

$[$

$1$

$-$

$1$

$($

$1$

$+$

$$

$)$

$$

$]$

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

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

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

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

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

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

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

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

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

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

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

$118.7608.3067.8877.4997.1396.8056.4956.< There are 3 Steps involved in it Step: 1 Get Instant Access to Expert-Tailored Solutions See step-by-step solutions with expert insights and AI powered tools for academic success Step: 2 Step: 3 Ace Your Homework with AI Get the answers you need in no time with our AI-driven, step-by-step assistance Get Started Recommended Textbook for Financial Accounting Impact On Decision Makers Authors: Gary A. Porter, Curtis L. Norton 7th Edition 1111464936, 978-1111464936 More Books Students also viewed these Accounting questions Question ★★★★★ The Hair Port is a hair-styling salon at Riverside Mall. Four stylists are always available to serve customers on a first-come, first-served basis. Customers arrive at an average rate of four per... Answered: 1 week ago Question ★★★★★ The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31. Advertising Expense Cost of Goods... Answered: 1 week ago Question ★★★★★ For a binary response variable ????, how are the odds that ???? = 1 computed? Answered: 1 week ago Question ★★★★★ A food processor uses approximately 27,000 glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is 18 cents per... Answered: 1 week ago Question ★★★★★ Question 4. A cabinet making firm plans to expand by setting up a new workshop and they need to estimate the total cost of the new facility. There is a nearby empty workshop building available and... Answered: 1 week ago Question ★★★★★ The transactions Company during January, its first month of operations, are listed below. Assume that Franklin Company cash payments (CP), purchases (P), and general (G). Assume that letters which... Answered: 1 week ago Question ★★★★★ Week 2 Prepare 1 : Week 3 Assignment Your first assignment is due next week. In this assignment, you will prepare and include a 2 5 0 3 0 0 word elevator pitch ( a short description of an idea,... Answered: 1 week ago Question ★★★★★ PART B Identify any specific issues with Moka s current accounting practices relating to revenue recognition and receivables management. Outline any other strengths and weaknesses with Moka s... Answered: 1 week ago Question ★★★★★ (a) During the audit of the Weak Bank (W), RBI has suggested that the Bank should either merge with another bank or may close down. Strong Bank (S) has submitted a proposal of merger of Weak Bank... Answered: 1 week ago Question ★★★★★ In determining performance incentives for a risky contract, what conditions would require a stronger incentive? Question 11 options: a) More risk averse employee b) Lower marginal cost of effort for... Answered: 1 week ago Question ★★★★★ I need the correct answer for the following quiz 2 questions for the course Behaviours in Organizations CORG 551 Question 1 (1 point) According to Blake and Mouton's Leadership Grid, what is a... Answered: 1 week ago Question ★★★★★ =+such a policy encourage you to join one company over another, or is salary level still the most important determining factor in deciding between compensation packages? Answered: 1 week ago Question ★★★★★ =+companys Bean Stock program written in a case study at http://www.mhhe.com/business /management/thompson/11e/case/starbucks-1.html (under the heading Schultzs Strategy to Make Starbucks a Great... Answered: 1 week ago Question ★★★★★ =+5. Some companies award stock options to all employees. Starbucks is a good example of the loyal employees and good press coverage such a policy can generate. Have a look at some information about... Answered: 1 week ago Previous Question Next Question View Answer in SolutionInn App Services Sitemap Fun Definitions Become Tutor Study Help Categories Recent Questions Expert Questions Company Info Security Copyrights Privacy Policy Terms & Conditions SolutionInn Fee Scholarship Get In Touch About Us Contact Us Career Jobs FAQ Campus Ambassador Secure Payment Download Our App © 2024 SolutionInn. All Rights Reserved $