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 $280,000 $490,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $340,000 $156,000 $ 56,000 $ 79,000 $ 440,000 $206,000 $ 98,000 $59.000 The company's discount rate is 15%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product B Product A years Payback period years Calculate the net present value for each product. (Use the appropriate table to determine the discount factor(s).) Product A Product B Net present value 3. Calculate the project profitability index for each product. (Use the appropriate table to determine the discount factor(s). Round your answers to 2 decimal places.) Product A Product B Project profitability index 4. 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% and use the appropriate table to determine the discount factor(s).) Product A Product B Simple rate of return 5a. For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period EXHIBIT 118-1 Present Value of $1:0+ Periods 1 2 0 4 5 6 9 10 0 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22 23 24 25 0.962 0.962 0.943 0.035 0.926 0.917 0.909 0.001 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 .025 0.007 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.800 0.604 0.683 0.672 0.661 0.650 0.640 0.880 0.884 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.400 0.482 0.467 0.451 0.437 0.422 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.478 0.456 0.437 0.419 0.402 0.386 0.370 0.356 0.341 0.328 0.410 0.790 0.746 0.705 0.666 0.630 0.506 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.750 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 .676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.125 0.116 0.107 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.004 0.086 0.625 0.567 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.250 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.577 0.506 0.442 0.388 0.340 0.299 0 263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.555 0.481 0.417 0.362 0.315 0.275 0.230 0.209 0.183 0.160 0.140 0.123 0.108 0.035 0.084 0.074 0.065 0.067 0.051 0.045 0.040 0.035 0.534 0.458 0.394 0.330 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.513 0.436 0.371 0.317 0270 0.231 0.198 0.170 0.146 0.125 0.108 0.003 0.00 0.069 0.060 0,052 0.045 0.030 0.034 0.030 0.025 0.023 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.430 0.359 0.294 0242 0.199 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.025 0.022 0.018 0.015 0.013 0.011 0.009 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.003 0.068 0.066 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.000 0.007 0.406 0.326 0.262 0211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.000 0.007 0.008 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.082 0.006 0.053 0.043 0.035 0.028 0.023 0.019 0,015 0,013 0.010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.000 0.007 0.006 0.005 0.004 0.361 0.281 0220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.020 0.023 0.018 0.014 0.011 0.000 0.007 0.006 0.005 0.004 0.003 0.002 0.333 0.265 0.100.150 0.116 0.090 0.009 0.054 0.042 0.033 0.025 0.020 0,016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.321 0.243 0.185 0.141 0.107 0.062 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.000 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.090 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 19 20 21 24 29 30 40 EXHIBIT 11B Present Value of an Amully of 51 in Arrears; 11 - ode 10% 11% 12% 13% 14% 10% 10% 17% 10 1 0.062 0.052 0.043 0.035 0.926 0.917 0.000 0.001 0.893 0.885 0.877 0.870 0.862 0.855 0.347 0.840 0.833 0.20 0.20 0.813 0.06 0.800 1.886 1833 1.808 1.783 1.750 1.736 1.713 1.690 1.668 1.647 1.620 1.605 1.50 1.500 1.547 1.620 1.000 1402 144 147 14 2.723 2673 2.624 2577 2.531 2.487 2444 2.402 2,361 2322 2.283 2.246 2210 2.174 2.140 2.106 2074 2012 2011 10011 3.465 3.087 3.312 3.240 3.170 3.102 3.037 2.974 2014 2.855 2.708 2.743 2.000 2.650 2.500 2.540 2404 2.448 2.404 2362 4212 4.100 3.993 3.890 3.701 3.606 3.605 3.517 3.433 3.352 3.274 3.190 3.127 3.058 2.001 2.026 2.864 2.803 2.745 2.680 5.242 6.076 4.017 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.580 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 5.380 5.206 5,033 4.868 4.712 4.564 4.423 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 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 0 7.435 7.108 6.802 6.515 6.247 5.995 5.750 5.537 5.328 5.132 4.946 4.772 4.607 4451 4.303 4.163 4.001 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.010 4.833 4.650 4.404 4.339 4.102 4.064 3.923 3.790 3.682 3.571 11 8.760 8.306 7.887 7.490 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 12 9 .385 8.863 8,384 7.043 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4278 4.127 3.085 3.851 3.725 13 9.986 0.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 14 10.563 0.890 0.205 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.000 4.802 4.611 4432 4.265 4.108 3.962 3.824 15 11.118 10.40 9.712 9.108 8.550 8.061 7606 7.191 6.811 6.462 6.142 5.847 5.575 5,324 5.092 4.876 4.675 4400 4315 4.163 4.001 3.850 16 11,652 10.838 10.106 0.447 8.851 8.313 7.824 7.370 6.974 6,604 6.265 5.954 5,668 5.405 5.162 4.938 4.730 4.536 4357 4100 4.033 3.7 17 12.166 11.274 10.477 0.763 0.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.000 4.775 4.576 4.301 4.210 4.050 3.910 18 12.650 11.690 10.828 10.050 0.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4410 4.243 4.080 3.928 19 1 3.134 12.085 11.158 10.336 0.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.636 4.442 4.263 4,097 3.942 20 13.500 12.462 11.470 10.594 0.818 9.129 8.514 7.963 7.469 7.025 6.623 6.250 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.270 4.110 3.954 14.029 12.821 11.764 10.836 10.017 9292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.801 4.675 4.478 4.292 4.121 3.963 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7.170 6.743 6.350 6.011 5.696 5.410 5.149 4.000 4.690 4.488 4.302 4.130 3.970 14.857 13.480 12.303 11.272 10.371 9.580 8.883 8266 7.718 7230 6.792 6.399 6,044 5.723 5.432 5.167 4.925 4.700 4400 411 4137 378 24 15.247 13.799 12.560 11.469 10.529 9.707 8.985 8.348 7.784 7283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7330 6.873 6.464 6.097 5.766 5.467 5.195 4.048 4.721 4.514 4.323 4.147 3.985 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.205 4.956 4.728 4520 4.328 4.151 3.988 16.330 14.643 13.211 11.987 10,935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.954 4.734 4.524 4.302 4.154 3.990 16.663 14.89 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7441 6.961 6,534 6.152 5.810 5.502 5.223 4.970 4.730 4.528 4.335 4.157 3.992 16.964 15.141 13.501 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 4531 4.337 4.150 3.994 1 00 17.292 15372 13.765 12.400 11.250 10.274 9.427 8.694 8.055 7496 7.003 6.566 6.177 5.820 5.517 5.235 4.972 4746 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.007 4.760 4544 4 347 4.166 2.990