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Lou Barlow, a divisional manager for Sage Company, has an opportunlty to manufacture and sell one of two new products for a five - year
Lou Barlow, a divisional manager for Sage Company, has an opportunlty to manufacture and sell one of two new products for a five
year perlod. His annual pay ralses are determined by his division's return on Investment ROl which has exceeded each of the
last three years. He computed the following cost and revenue estimates for each product:
The company's discount rate is
Click here to vew Exhibit and Exhibit to determine the approprlate discount factors using tables.
Required:
Calculate each product's payback perlod.
Calculate each product's net present value.
Calculate each product's internal rate of return.
Calculate each product's profitability index.
Calculate each product's simple rate of return.
a For each measure, Identify whether Product A or Product B is preferred.
Based on the simple rate of return, which of the two products should Lou's division accept?
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Based on the simple rate of return, which of the two products should Lou's division accept?
EXHIBIT B
Present Value of $;
Periods
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