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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 fiveyear perlod. His
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a fiveyear perlod. His annual pay ralses are determined by his division's return on Investment (ROI), which has exceeded 21% 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 19% Click here to vlew Exhlblt 14B-1 and Exhlblt 14B-2, to determine the approprlate discount factor using tables. Requlred: 1. Calculate the payback perlod for each product. 2 Calculate the net present value for each product. 3. Calculate the Intemal 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. 6b. Based on the sImple rate of return, which of the two products should Lou's division accept
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