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 has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: $310,000 Cost of equipment (zero salvage value) 510,000 Annual revenues and costs: Sales revenues 360,000 $ 164,000 62,000 81,000 460,000 $214,000 Variable expenses Depreciation expense Fixed out-of-pocket operating $ 102,000 65,000 $ costs The company's discount rate is 18% Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor using tables. EXHIBIT 12B-1 Present Value of $1; Periods 4 % 7% 9 % 5% 6% 8% 10% 11% 12% 13% 14% 15 % 16% 17% 18% 19% 20% 21% 22% 23% 24% 25 % 0.962 0952 0.943 0935 0.926 0.917 0909 0.901 0893 0.885 0877 0870 0862 0.855 0847 0840 0833 0826 0820 0813 0.806 0800 0.925 0.907 0.890 0873 0857 0842 0826 0.812 0.797 0.783 0.769 0.756 0743 0731 0.718 0.706 0694 0.683 0672 0661 0.650 0.640 0.889 0.864 0.840 0816 0794 0.772 0751 0.731 0712 0.693 0675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.855 0823 0792 0763 0735 0708 0683 0.659 0636 0,613 0592 0572 0552 0.534 0516 0499 0482 0467 0451 0437 0.423 0410 5 0.822 0784 0747 0713 0681 0,650 0621 0.593 0567 0.543 0519 0.497 0476 0.456 0437 0419 0402 0386 0370 0.355 0.341 0328 0.790 0746 0705 0666 0630 0.596 0564 0.535 0507 0480 0456 0.432 0410 0.390 0.370 0352 0.335 0319 0.303 0289 0275 0262 6 0.760 0711 0.665 0.623 0583 0.547 0513 0482 0452 0.425 0400 0.376 0.354 0.333 0.314 0.296 0279 0.263 0249 0235 0222 0210 0.731 0.677 0.627 0.582 0.540 0.502 0467 0.434 0.404 0376 0.351 0.327 0.305 0.285 0.266 0.249 0233 0.218 0204 0191 0179 0168 0.703 0645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0284 0.263 0243 0225 0.209 0194 0.180 0167 0155 0144 0134 10 0.676 0.614 0,558 0.508 0463 0422 0.386 0.352 0.322 0.295 0270 0247 0.227 0.208 0191 0.176 0162 0.149 0137 0126 0.116 0107 0.135 0123 0.112 11 0.650 0.585 0.527 0475 0429 0.388 0350 0.317 0287 0.261 0237 0215 0195 0.178 0162 0.148 0.103 0094 0.086 12 0.625 0557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0231 0.208 0187 0.168 0152 0137 0.124 0.112 0102 0092 0083 0076 0.069 13 0.601 0530 0.469 0415 0368 0.326 0290 0258 0229 0.204 0182 0163 0145 0130 0116 0104 0093 0.084 0075 0068 0061 0055 0577 0505 0442 0388 0340 0299 0263 0232 0205 0181 14 0160 0141 0125 0111 0.099 0.088 0078 0069 0062 0055 0049 0044 15 0.555 0481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0160 0.140 0123 0108 0095 0084 0.074 0065 0057 0051 0045 0040 0035 0107 0093 0081 0071 16 0.534 0458 0.394 0.339 0.292 0.252 0.218 0188 0163 0141 0123 0.062 0.054 0.047 0042 0036 0032 0028 0.317 0270 0.231 0198 17 0.513 0436 0.371 0170 0146 0125 0108 0.093 0.080 0.069 0.060 0.052 0.045 0039 0034 0030 0026 0023 0.494 0416 0.350 0.296 0.250 0212 0.180 0.475 0.396 0.331 18 0.153 0.130 0111 0.095 0.081 0.069 0.059 0.051 0.044 0038 0032 0028 0024 0.021 0018 19 0.277 0232 0.194 0164 0,138 0.116 0.098 0083 0.070 0.060 0.051 0043 0037 0031 0027 0.023 0.020 0017 0014 20 0.456 0377 0.312 0258 0.215 0178 0149 0124 0104 0087 0073 0061 0051 0043 0037 0.031 0026 0022 0019 0016 0014 0012 21 0.439 0.359 0.294 0.242 0199 0.164 0135 0.112 0.093 0077 0.064 0053 0.044 0.037 0031 0.026 0022 0018 0015 0013 0011 0009 0.422 0342 0278 0226 0184 0150 0123 0.10 22 0.083 0068 0056 0046 0038 0032 0026 0.022 0018 0015 0013 0011 0.009 0007 23 0.406 0326 0262 0211 0170 0138 0112 0.091 0074 0.060 0049 0040 0033 0027 0022 0018 0015 0012 0010 0009 0.007 0006 24 0.390 0.310 0.247 0197 0158 0126 0.102 0.082 0066 0053 0043 0.035 0.028 0023 0.019 0.015 0013 0.010 0008 0.007 0.006 0005 25 0.375 0.295 0.233 0.184 0146 0.116 0.092 0.074 0.059 0.047 0.038 0030 0024 0.020 0016 0.013 0010 0.009 0.007 0.006 0.005 0004 26 0.361 0281 0.220 0172 0135 0.106 0.084 0.066 0.053 0.042 0033 0.026 0021 0.017 0014 0.011 0.009 0.007 0006 0.005 0004 0003 27 0.347 0268 0.207 0161 0125 0.098 0.076 0.060 0.047 0.037 0.029 0023 0018 0.014 0011 0.009 0007 0.006 0.005 0004 0.003 0.002 28 0.333 0255 0.196 0.150 0116 0.090 0.069 0.054 0.042 0033 0.026 0020 0.016 0012 0010 0.008 0006 0.005 0.004 0003 0002 0002 29 0.321 0243 0185 0141 0107 0.082 0.063 0.048 0037 0029 0022 0017 0014 0011 0008 0.006 0005 0.004 0.003 0002 0002 0002 0099 0075 0057 0044 0033 0026 0020 0015 0012 0009 0007 0.005 0004 0.003 0003 0002 0002 0001 30 0.308 0231 0174 0131 0,208 0142 0 097 0067 0046 0032 0022 0015 0011 0008 0005 0004 0003 0002 0.001 0001 0001 0000 0000 0000 0000 0 000 40 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears; 24% 25 % Periods 4% 5% 6% 79% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 0.870 0862 0855 0847 0840 0833 0.962 0952 0943 1 0.935 0926 0.917 0.909 0901 0.893 0885 0.877 0.826 0820 0.813 0806 0800 1690 1.668 1.886 1859 1,833 1783 1.759 1.736 1.713 1647 1.626 1.605 1.585 1.566 1.547 1.528 1509 1.492 1474 1.457 1440 1.808 2.775 2723 2.673 2.624 2.577 2.531 2.487 2444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2140 2106 2.074 2.042 2.011 1.981 1.952 3102 3.037 2.974 2.914 2.855 2.798 2743 2.690 2639 2589 2540 2 494 2448 2.404 2.362 3630 3546 3.465 3.387 3312 3.240 3170 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 6 5.242 5.076 4917 4.767 4.623 4.486 4355 4231 4111 3.998 3889 3.784 3.685 3.589 3498 3410 3.326 3.245 3.167 3.092 3.020 2951 7 5.582 5.389 5.206 6.002 5.786 5.033 4868 4.712 4.564 4423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 5.971 5.747 5.535 5.335 5.146 4968 4.799 4.639 4.487 4.344 4.207 4.078 3954 3837 3.726 3.619 3.518 3.421 3.329 6.463 6.210 6.515 6247 5.995 5.759 5.537 5.328 5132 4946 4772 4.607 4451 4.303 4163 4.031 3905 3786 3673 3.566 3.463 7435 7108 6.802 10 8111 7722 7360 7024 6.710 6418 6145 5.889 5650 5426 5216 5.019 4833 4.659 4494 4339 4.192 4054 3.923 3799 3682 3571 11 8760 8.306 7.499 7139 6805 6.495 6.207 5.938 5687 5.453 5.234 5.029 4836 4.656 4486 4.327 4177 4.035 3.902 3.776 3.656 7.887 8.384 79437536 9.385 8.863 7161 4.988 4793 4611 4.439 4278 4.127 3.985 3.851 3.725 12 6.814 6492 6.194 5.918 5660 5.421 5197 6.750 6424 6122 5.842 5.583 5.342 5116 5 4533 4362 4203 4.053 3.912 3.780 13 9.986 9.394 8.853 8.358 7.904 7487 7103 4910 4715 10 563 9899 9.295 87458244 14 7786 7.367 6982 6628 6.302 6.002 5724 5.468 5.229 5.008 4802 4611 4.432 42654.108 3.962 3824 11.118 10.380 9712 9.108 8.559 8.061 7606 7191 6.811 6.462 6.142 5.847 5575 5.324 5.092 4876 4675 4.489 4315 4.153 4.001 3.859 7824 7379 6 974 6604 6.265 5.954 5.668 5.405 5162 4938 4730 4 536 4 357 4189 4033 3887 6.729 6373 6.047 5749 5475 5.222 4 990 4775 4576 11652 10838 10106 16 9.447 8.851 8.313 12.166 11274 9.763 9122 8.022 7549 7120 17 10.477 8.544 4.391 4.219 4.059 3.910 12.659 11.690 10.828 10.059 9.372 8756 8.201 7.702 7.250 6.840 6.467 6128 5818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 18 19 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7839 7366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4442 4.263 4.097 3.942 13.590 12.462 11.470 20 10.594 9818 9129 8.514 7963 7469 7.025 6623 6.259 5.929 5628 5.353 5101 4.870 4657 4460 4279 4,110 3954 10.836 10.017 21 14.029 12.821 11.764 9.292 8.649 8.075 7562 7102 6.687 6.312 5.973 5665 5.384 5127 4.891 4.675 4.476 4.292 4121 3.963 14.451 13.163 12.042 11.061 9.442 8.772 8176 7645 22 10.201 7170 6.743 6.359 6.011 5696 5410 5149 4909 4690 4.488 4.302 4130 3.970 9.580 8.883 8.266 7718 23 14.857 13.489 12.303 11.272 10.371 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 24 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7784 7.283 4.507 4.318 4.143 3.981 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4713 25 15.622 14.094 12.783 9.823 9.077 8422 7843 7.330 6873 6.464 6.097 5.766 5467 5195 4948 4721 4514 4.323 4.147 3.985 11.654 10.675 8 488 7896 7.372 6.906 6491 6118 9.237 8.5487943 7409 6.935 6.514 6 136 5798 5.492 5.215 4964 4.734 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 5,783 5480 5 206 4956 4728 4,520 4328 4.151 3.988 10 935 10027 27 16.330 14.643 13.211 4.524 4.332 4.154 3.990 11.987 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8602 7984 7441 6.961 6,534 6.152 5.810 5.502 5.223 4970 4739 4.528 4.335 4.157 3.992 28 29 16,984 15.141 13.591 12.278 11.158 10,198 9.370 8.650 8.022 7470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8694 8055 7496 7003 6.566 6177 5829 5517 5235 4979 4746 4534 4.339 4.160 3.995 40 19,793 17159 15.046 13.332 11.925 10757 9779 8.951 8.244 7634 7105 6.642 6.233 5.871 5548 5258 4.997 4760 4544 4.347 4.166 3.999 Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period years years 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 .. Calculate the internal rate of return for each product. (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Product A Product B Internal rate of return Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Project profitability index Calculate the simple rate of return for each product. (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Product A Product B Simple rate of return %