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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
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 19% each of the last three years. He has computed the cost and revenue estimates for each product as follows: The company's discount rate is 17%. Click here to view Exhibit 13B-1 and Exhibit 13B-2. to determine the appropriate discount factor using tables. Required: Calculate the payback period for each product. (Round your? Answers to 2 decimal places.) Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.) Calculate the internal rate of return for each product. (Round percentage? Answer to 1 decimal place, i.e. 0.1234 should be considered as 12.3% and Round discount factor(s) to 3 decimal places.) Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your? Answers to 2 decimal places.) Calculate the simple rate of return for each product. (Round percentage? Answer to 1 decimal place, i.e. 0.1234 should be considered as 12.3%.) For each measure, identify whether Product A or Product B is preferred . Based on the simple rate of return, Lou Barlow would likely: Accept Product A Accept Product B Reject both products
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