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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 19% each of the
last three years. He computed the following cost and revenue estimates for each product:
The company's discount rate is 17%.
Click here to vew Exhibit 14B-1 and Exhibit 14B-2, to determine the approprlate discount factor(s) 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.
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?
Complete this question by entering your answers in the tabs below.
Required 6B
Based on the simple rate of return, which of the two products should Lou's division accept?
EXHIBIT 14B-1
Present Value of $1;
1
(
1
+
)
Periods 4%5%6%7%8%9%10%11%12%13%14%15%16%17%18%19%20%21%22%23%24%25%
10.9620.9520.9430.9350.9260.9170.9090.9010.8930.8850.8770.8700.8620.8550.8470.8400.8330.8260.8200.8130.8060.800
20.9250.9070.8900.8730.8570.8420.8260.8120.7970.7830.7690.7560.7430.7310.7180.7060.6940.6830.6720.6610.6500.640
30.8890.8640.8400.8160.7940.7720.7510.7310.7120.6930.6750.6580.6410.6240.6090.5930.5790.5640.5510.5370.5240.512
40.8550.8230.7920.7630.7350.7080.6830.6590.6360.6130.5920.5720.5520.5340.5160.4990.4820.4670.4510.4370.4230.410
50.8220.7840.7470.7130.6810.6500.6210.5930.5670.5430.5190.4970.4760.4560.4370.4190.4020.3860.3700.3550.3410.328
60.7900.7460.7050.6660.6300.5960.5640.5350.5070.4800.4560.4320.4100.3900.3700.3520.3350.3190.3030.2890.2750.262
70.7600.7110.6650.6230.5830.5470.5130.4820.4520.4250.4000.3760.3540.3330.3140.2960.2790.2630.2490.2350.2220.210
80.7310.6770.6270.5820.5400.5020.4670.4340.4040.3760.3510.3270.3050.2850.2660.2490.2330.2180.2040.1910.1790.168
90.7030.6450.5920.5440.5000.4600.4240.3910.3610.3330.3080.2840.2630.2430.2250.2090.1940.1800.1670.1550.1440.134
100.6760.6140.5580.5080.4630.4220.3860.3520.3220.2950.2700.2470.2270.2080.1910.1760.1620.1490.1370.1260.1160.107
110.6500.5850.5270.4750.4290.3880.3500.3170.2870.2610.2370.2150.1950.1780.1620.1480.1350.1230.1120.1030.0940.086
120.6250.5570.4970.4440.3970.3560.3190.2860.2570.23

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