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 divisions return on investment (ROI), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

	Product A			Product B
Initial investment:
Cost of equipment (zero salvage value)	$	380,000		$	575,000
Annual revenues and costs:
Sales revenues	$	410,000		$	490,000
Variable expenses	$	186,000		$	218,000
Depreciation expense	$	76,000		$	115,000
Fixed out-of-pocket operating costs	$	89,000		$	69,000

Lou Barlow, a division 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 rum en investment (RON, which has beeded 22% each of the last tree years. He has come the cost and revenue estimates for each product as follows: Product Product $380,000 $75,000 alinment Cost of equipment (rosage value) Annual revenues and costs Sales revenues Variable expenses $410,000 $180.000 490,000 $218.000 Fixed out-of-pocket operating costs The company's discontratis 20% Click here to view Exhibit .1 and Exhibit 2. to determine the appropriate discount factor using tables Required 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Cmque Product B Payback period years 2. Calculate the nel present value for each product (Round discount factor(s) to 3 decimal places) Product Product Net present values 23,875 3. Calculate the internal rate of return for each product (Round percentage answers to 1 decimal pole 8.124 should be considered as 12,3% and round discount factors) to 3 decimal places) capisces required Internal rate of un 4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.) Product A Product B Project profitability Index 5. Caloulate the simple rate of retum for each product. (Round percentage answers to 1 decimal place. Le 0.1234 should be considered as 12.3%.) Product Product B Simple rate of return 6a. For each measure, identify whether Product A or Product B is preferred. Net Present Value Product B Profitability Index Product Payback Period Product Internal Rate of Return Product A 6b. Based on the simple rate of return, Lou Barlow would likely Accept Product A Accept Product B Reject both products