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 17% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Products Initial investment Cost of equipment (zero salvage value) $ 180,000 $ 390,000 Annual revenues and costs: Sales revenues $ 260,000 $360,000 Variable expenses $ 124,000 $ 174,000 Depreciation expense 5 36,000 $ 75,000 Fixed out-of-pocket operating costs $ 71,000 $ 50,000 The company's discount rate is 15% Click here to view Exhibit 148.1 and Exhibit 148-2. 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 profitability index for each product 5. Calculate the simple rate of return for each product Le revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs 200,00 $ 124,000 $ 36,000 $ 71,000 > 300,000 $ 174,000 $ 78,000 $ 50,000 The company's discount rate is 15%. Click here to view Exhibit 148.1 and Exhibit 14B-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 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. 66. 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. Reg 1 Req 2 Reg 3 Reg 4 Req 5 Reg 6A Reg 6B 7 0.693 I 9 6 LIB 1415-1 seat Value of SI: 1 (1) he Periods 19 59 6% 790 99 90 1094 1194 12% 1396 149 15% 169 1796 18% 1996 2098 2198 22% 2394 24% 25% 1 0962092091320935 0.9260.91710.909 0.901 0.893 08850.822 0.8700,562 0.635 0847 0.840 0.8330.8260.8200.8130.8060.800 2 0925 0907 0.5900873 0857 0.84210826 0.812 0.797 0.7830.769 0.756 022302310718 0.706 0.683 0.672 0.661 0.650 0.640 3 28690,864 0.8400816079402720751 0.71 0.712069306750658 0.6410,620 6090.593 0.579 0.56410.551 0.537 0.5240.512 + 0855 0.823 0.192 0.7630.735 0.1080683 0.65906360613 0.5920.5720.352 0.534 0516 0.499 0.482 0.467 0.451 0.4370/4230.410 5 0.822 0.74 0.747 0.7130.65106500621 10.593 0.5670590.519 0.1970.476 0,456 047 04190402 0.386 0.3700355 0.341 0.328 0.790 0.746 0.705 06660.610 0.396 0.568 0.535 0.5070-48003456 0,4320 4100 390 03700.35203330.3190 3030.289 0.2750.262 0.7660.711 066506230.583 0.5470513040904520.425 0.400037603540.333 0.3140.296 0.2790.263 0.2490.233 0.222 0.210 0.731 06702703820 5000 502 0,46 0,434 0.40403760.351032703050.2850 266 0.2490 233 0218 0.2040.1910.179 0.168 0.703 0.6450392 0 546105000 4600.424 0.391 0.361 0.3330002840.26302430225 0.2090.1940 1800 1670.155 0.144 0.134 10 0.676 0.61 0.558 TOSO 0.46 04220.386 0352 0.22 0.295 0.270 0.2470.227 0.208 0.1910.176 0.1620 1490.1370.126 0.116 0.107 11 0.65070505275 0.4290388 03500317 0.2870 261 0.23 0.215 0.1950.178 01620180135 0.1230112 0.1030.0940.086 12 0.6230357049704400 197 033603190.236 0.2570.231 0.208 0.1870.1680132 0.1370.1240.1120 1020.092 0.083 0.0760069 13 0.601 0.510 04690/415 0.368 0326029002580 2290 201 01201630.145 0.13010116 0.104 0.0930084 0.075 0.068 0.06 0.055 14 0327 0.50304020383 0340 0.299 0263 0.22 0.205101810160010101253 01 0.0992 0083007810.069 0.062 0.035 0.049 0.041 15 0355 0.11 0.017 0362 0.315 0275023910,209 0.18 0.16 0.110 10.12.2010 0.0950084 0.0740.0650.0570.0510,045 0,0400035 16 05500458 0.3940339 0292 02520213 0.188 0.163 014101230.1020.093 0.081 00710.062 0.054 0.0071004200361 0.032 0.028 051 0.4360371 031702100231 0.19 0.1700116 0125 0.108 0.09 0.000 0.06900602 0.032 0.045 11 0.03900340.030 0.026 04910,4160.3500 2960290 0212 0.1800,153 0.1300 111 10.095 0,0810 069 10.0590051 0.023 19 0.014 0.038 0.0320028 0.02 0.021 0.018 25 D DD 2090168101350116 0.003 0.00 0.00 0.06030051001 0.0172 0.031 0.02700200200017 20 046037203102580235 0.1780 1490.124 0.1000012002200610051 0.014 0000037 001 00260020190016 0.014 0.012 21 0.439 033902940.242.19901660 1330 11200930077 0.0649050044WOYA 000026002200180015000011 043D2Y 026 01140 1500 120 101 00 0.0600600160038 0.009 10/400076020202110110 0.738 0112070106740000019 000000000220022007301507012001000090000006 0020026000000150010011 07009 0.007 0.00 OOO OLD0358010100000066 0.03 0.0003 0.023000015001OTO 0.008 0.007 0.000 0.005 4 21 22 23 24 25 26 27 28 29 30 10 0.4220342 0.278 022610.184 0.1500123 0.101 07083 0.068 0.056 0.046 UUSS VOZ IVA 04080326 0.262 02110170 0.138 0.112 0.091 0.07400601004900400033002 0.0220.0180.01560120.0100.0090.00 02006 0 3900 3100 247 0 1970.158 0.1260 1020.0820066 0.053 0.04 0.00028 0.02 0.01900150013 0010 0.008 0.007 0.006 0.005 0375 0295 0.2330 1840 146 0176 0.092 0.074 0.0590.007008 0.03000024 0.0200.0160.013 0.0100009 0.00 0.00 0.005 0.004 0361 021 02200172 0.135 0.106 0.0800066 06530042003 0.026 0.021 001700100011 0.00900070006 0005 0.001 0.003 0307 025 02070161150.09 0.0160.060 0.0470037 0.02900230.0180014001101009 0.002 0005 OTO030004 0.03 0.002 0333 0.250 1960 1500 1160090 0.069050042003 0.0260820001600120010 0.00 0.006 0.0050 000 0.003 0.002 0.002 0321 0.24 0.1830 140 107 00820063 0018 0.03 0.029002001200140011 0001 0.0060005 0.000 0.00 0.002 0.0020002 03010231017411 0.099 0.075 0700140033 0,025 0.02000150012 0.00 0.00 0.005 0.0040.000 0.00 0.002 0.00207003 02000.142 0097 0067 0.0160032002200150010008 0.005 0.0040.003 0.002 0.001 0.00107001 0.000 0.000 0.000 0.000 0.000 % 96 E 422 9 OLARE 8 6 EHIBIT 140-2 Punt Value of an Annuity of S1 in Arrears, 111-1(1+) Periods 590 69 79 89 99 1096 12 149 15% 1696 179 18% 1948 209 21% 2200 2396 2494 3595 1 0.9620.952 098 0.93 0.926 0.912 0.909090108930.885 0877087008620335 0.847 0.840 0.833 0.8260.820 0.813 0.8060 800 2 1586 1859 1833 1308 1.781 1.7599 123617131690 1668 1647 1626 160571581.5661547 1525 15091492147414571.440 3 2.2753272322673 2624 257 22331248722444 2.40222361 222 223 2246 221021742140 2106 20742042 2011 1981 1982 4 363035463 4653387 33123.240.170102 3.017297429142.855 2198 27372.6902639 239 2540249424482740427362 5 14524529 4.100 39933.890.791 1696 535173.4332352027 1993.27 20582991 292 28642.803 27452689 52023076 +9174767 462 386335423141113.9983.8893.7843685251973.69834103326 3245 3.162 3.092 3.0202951 7 6.00251786 3.55233895205503348684712 4564442420416040393923,812317053.605303416 332732423 761 6.73 6.463 6.210 5921723535855 160964799 4.639 4,457434420714078 3.958383732263.619 3.5183,421 7:33 17:1086 802631562471 E9953 EX3933373.2313240464724607 4451 4.30311630313.905 3.7863673335663.463 10 8.1.18 2330070246710 6413610558193 650 42602160192333 4.659 449443194.1924054 3.92.1993.6822371 11 8.750 8305 7.887/1997, 1396.OS 6:49536.207 5.938368225.4532343029483646564.4864 41774033 39023.7763656 12 935 1363384204161616168146492 6.1943918360542131974.23 4.79346114394278 14.12739853851 2.725 13 199369394591835079001248710364750642461222833249104.7159433396242011405339123780 14 10569899192937459244736736698266286.10216.00232 3.6290048024611424254.108 33962824 15 111181038097129108 7606191611646261624725755324310924876346754489 431415340013859 16 176510 8 10 106940788518517245791697406006265590566820562493 47305364337418940387 17 02166 012100917976321123 00022519 120 67296371600274925225322249901453576391 42194.65972910 18 1263911690102231065993256820170217250684064676129 5.833534522350348124605 4419 420 4.001928 19 1412085158 161369.60089508367397736665506-1958X950453163070476542126340973942 20 0901246211070105909.8118919019531205662662959293162053521010870265747600279110394 21 14029 12820116416100179292864910252627102668263123.923665 221224891467524976429241211963 22 1451120121101102012016761521706736959601157696524105149490946904488 430 4.1303970 23 1033 13419 023031122110371 93803813307662306,192699601459232167 093403499957 1976 24 1522 1.799 250 1969 10329 9.707 3.98534877847280633564346.073746 3:451.182 493714307 43184.143981 190 6553 652.03 TGL LADO TOT 1620 FT TITO 21 22 23 24 23 14 DT12002 01.0611020124624728.1767645217067136359 114.357 13.459 12.30311272 10371 9.5808.8838.26677137230.6.19263996104030/2544323.16 4.925 4.7034499031141373.976 115767 10.799 12350 11 469105299.7070898583452283633356346.07335.74635,451 3.182 4.937 47134 507431841453.981 1562 209 1213 11:50 1065339032730333067364646097563467719549484721 4314324147 3.955 159933143151.003) 11126 10 3109.929.9.16184888963726.90664916118343545020649564723 359048281411393 1630160121117987 16935 10.027927834867983740969565146.136.79854922154964473445244.33241543990 16661428 13:06 12137 11051 10.1169.303602 1994 71 696163306152381035023922397047394528 433541533.992 169942510113391 12278 1110 10.1989.70 3.650 1.022/470623 635116.166512013310229197590 6331433791593998 12192 15372763122109 1120002902736906035706700365666127.82935121235919 47 334 339 OTO03995 19791 17.15 15.06113219210179798991020764210566426323501 3545 5849974780 314 3471663999 27 28 30 40 6a. For each measure, identify whether Product A or Product B is preferred. 66. 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. Reg 1 Reg 2 Reg 3 Reg 4 Req 5 Req 6B Reg 6 Calculate the payback period for each product. (Round your answers to 2 decimal places.) ces Product B Product A years Payback period years Reg Req 2 > 6a. For each measure, identify whether Product A or Product B is preferred. 6b. 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. Reg 6A Req 6B Reg 2 Reg 1 Reg 5 Reg 3 Reg 4 Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount. Product A Product B Net present value Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6B Reg 6A Calculate the profitability index for each product. (Round your answers to 2 decimal places.) ces Product A Product B Profitability index Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6B Reg 6A Calculate the profitability index for each product. (Round your answers to 2 decimal places.) ces Product A Product B Profitability index Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Req 5 Reg 6A Reg 68 Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place i.e. 0.123 should be considered as 12.3%) Product A Product B Simple rate of return 6a. For each measure, identify whether Product A or Product B is preferred 6b. 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. Reg 3 Reg 5 Reg 1 Reg 4 Reg 6A Reg 2 Reg 68 For each measure, identify whether Product A or Product B is preferred. ces Net Present Value Profitability Index Payback Period Internal Rote Simple Rate of of Return Return
