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 in which has exceeded 25 each of the last three years. He has computed the cost and revenue estimates for each product as follows 1 35.000 Initial estatt Cost of twelve value al revenue and costs Stevens Varlsblo esperes Deprecatione Fired cut of potporating costa 150,000 1 172.000 1 08.000 1.000 140.000 1 225,000 3 105,000 300,000 The company's discount rate is 17% Click here to view Ext 1481 and Exhibit:14822. to determine the appropriate discount factor using tables, Required: 1 Calculate the payback period for each product 2. Calculate the net present value for each product 3. Calculate the internal rate of return for each product 4 Calculate the profitability index for each product 5. Calculate the simple rate of return for each product 6. For each measure, identify whether Product A or Product B is preferred Gh. Based on the simple rate of return, which of the two products should Lous des accept? XHIBIT 148-1 Present Value of $1.11 ) Periods 4% 5% 6% 7 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.963 0.952 0943 0935 0926 0917 0.909 0.001 0.092 0.885 0.877 0370 0.862 0655 OM 0.340 0.833 0.826 0 820 0.813 0 806 0.800 2 0925 0.90708900073 0.857 0.8420826 0812 0.797 0.783 0769 0756 0743 0731 0718 0706 0.694 0,683 0.672 0.661 0.650 0.640 3 08890.364 0.840 01516 0.794 0.772 0.751 0731 0712069306750658 0641 0624 060905930579 0.564 0551 0.537 0.524 0512 4 08950822.792 0.763 0.7950.708 06820659 0656 06110 592 0.572 052 OST405160409048210.467 0 451 0.437 0423 0410 5 0,022 0714 0.749021306010600621 0593 0.5670343 0519 0497 0.4760456 041704100402 0380 0.3700355 0.341 0.328 0 0.790 0.746 0.70 0600 0.610 0596 0.5640535 0.57 0.40 0456 049204100 3900 3700 3520315 0.11 0.003 0.200 0.2750.262 7 076007110065 06250553054710510420 45204250 4000 3700 3540333 0 114 0 29002790 2630 2490 2350 222 0210 07.0627 050 540 050 04670414 94040176 0510.327 0.105 0.285 0,2660249 0233 021802040191 0179 0.168 9 070310.04510592 0546 0.500 0.460.0.4240391 0361 0333 0.308 028402630243 0.225 0.209 0.1940 180 0.167 0.1550 1440,134 10 06760,0140556 5080463 0422 0.386 0.352 0322 0.295 0.270 0247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 11 06500585 0.5270475 0429 0388 03500 3170257 0267 0237 0215 0.19 0.178 0.163 0.14 0.125 01230.112 0.10 00940085 12 0.625.10.557 0 497.0464 0.207 0356 031002860257 02310 208 0,187 0.168 0.152 0137 0124 0112 0.102 0,002 0,083 0.076 0000 13 0.001 0.530.0 460 04150366 0 326. 0.290 0258 02290204 0.182 0163 0.1450 130 0.116 0.1000093 0.054 0.025 0.008 0.061 0.055 0 5770 505 0.442 0388 0340299 0 263 0.232 0.205 0.161 0.160 0.141 0.125 0.111 0.099 0.088 0.072 0.069 00620055 00490044 35 0555 0.4810417 0362 0315 0.275 0.299 0202 0 1830 160 01400123 0.108 0095 0.084 0078 0.005 0.053 0051 0.0450.000 0.035 10 0534 0 458 0 39403200292 0252 021801880 163 0.141 01230107 0.093 0.0810071 0062 0054 0.047 0.042 00360033 0028 17 0515 0.436 0.071 03170 2700 23101900-1700 146 0125 0.106 0093 0.0000069 0000 00520045 090034 0.030 0026 0.023 0.494 0.4160350 0.296 0.250 0.212 0.110 0.153 0.1300111 0095 0001 0.069 0059 0051 00140038 0.032 0.025 0.024 0.021 0.018 19 0475 0.396 0.331 0277 0212 MO1640138 0 116 00980063007000600051004300370031 0.027002002000170014 20 0.456 0377 0.312 0.250 0.215 0.17 0.140 0.1240106 0.087 00730061005100130.037 0031 0026 0.022 0.019 2016 0014 0012 21 0499 0.3590294 024210.1900.164 0.125 0.112 0.093 0.077 0.064 005 0044 007 0031 0,026 00220018001500100110 000 22 0.422 0.342 0.278 02260 1540.15001230.1010.083 0.0080056004600380032 0.0360022001800150013 0.0110.0090.007 23 10.406 0.32010220201 0 1700138 0.112100910074 0600 004900100033 0.027 0.022 000 0015 D0120010 0000 0.007 0006 24 0 3900 3100 247 0.197 0.15 0.120 0.102 0.002 0.005 003 004300350028 0.023 0.019 0015 0.013 0010 0005 0.007 0.006 0.005 25 0375 0295 0231 0184 0.146 0.116 0.092 00740090042 0.0380030 0.024 0020 DO 0011 0010 0.009 0.007 0.005 0005 0.004 EXHIBIT 148-2 Present Value of an Annuity of $1 in Arrears 111 1(1) Periods 4% 5% 6% 794 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0243 0935 0.926 0917 0.909 0.003 0.893 0.885 0 877 0.870 0.862 0.855 0.847084008330826 0.820 0.8130306 0.800 2 1.880 1859 1833 1808 1783 1.759 176 1690 1655 1 647 1620 1605 158515661547152841509. 1492 1.474 1457 1.440 3 2775 2723.2673 2624 2577253124872.444 2402 236123222283 2246 2210 2174 2140 2106 2074 2042 2011 1981 1952 4 3.630354634653387 3.312 3 240317031023037 29742.9142855 2.798 2.74326902639 2 589 2.540 24942448 2.404 2.362 5 4.452 43294212 4.100 3.9933890 3.791369037605 3.517 3433 335252225.1993.127 3056 2991 2920 28642.803 2.745 2689 5.242 5.076 49171 4.767 4.6234486 4355 4231 4 111 9983889 378436853.589 3.498 3.410 3.326 3245 3.167 3.092 3020 2951 6002 5.786 5582 5.389 5.206.5.035 4.8684712456444234288 4160 403939223 81297063605950831416332232423.161 8 6.733 6.46362103 971 57475.535 5.335 5.146 4.968 4.7994639 4.487 4344 4 207 40783.954 3.837 3.726 3.619 3.5103.421 329 9 7.435 71086502 65156247 5.995 5759 5537 53285 132 4946 4772 4607 4451 4.303416340313.905 3.786 3 6733.566 3.463 10 81117722730070246 710 6418 6.145 588956505.4265 216 50194 833 4659 4494 43394192 40543 923 3.799 3.682 3571 11 8.760 8.306788774997A139. 6.80564956 207 5.930 5.687 5.453 5 2345029483646564436 4327 4.177 4.035 2.902.770.656 12 9.385 8.863 B.3842.94375367,161 8.814 6492 6.1945 910 5.600 1420 5.1971 4 988 4793461144394270 412739853.85 3.725 13 9.986 9294 88538.35022904 7487 7/10367506424612258425.5835 342 5.118 4.910 4715 453 4162 4203 4053 3.912 3.780 14 10.563 9.8999 295 8.7458 244778623676.982 6 628 63026002 5724 5.466 52295.000 4802 4611 4.432 42654.108 3.9623.824 15 11.118 10 380 9712 9.103 550 06126062419168116.463 6.1425 342 55755.324 5.092 4876 4.67544894 315 4.1524001 3.859 16 11.652 10.838 10.100 9447 08513313782473796 974 6,604 6 265 5.9545.000 5.405 162 4939 4.730 45364 357 4.18940333.887 17 12.1681127410.4779763 9.1228544 B02275497.120 672963736047 5.749 SAYS 5 222 4990 4775 4.576 4 39142194059 3.910 TE 12.659 11 690 10.828 10 059 9.3228.7563 2012 702 725068406 467 | 6.128 5818 5534 5 273503348124608 4 419 43434.0803928 19 13.134 120851115810 33696046 950 365 2.83923666.938 6.5506.198 5877 5.504 5310 507048494635 4.442 4263 4,097 3942 20 13.590 12 462 11 470 10 594 98169.129 514 963 7 469 7025 6.623 62599 929 562553535.101 4870 4657 44604279 4.110 3.954 21 14029 1282111764 10836 100179292 8649 807517562 2.1026.687 6312159735.6655.384 5.1274,891 4675 4.476 4 292 4121 3.963 22 14.451 13.163 12 042 11 061 10 201 9.442 8.7728.176 17.6457,170 6743 6359 6011 5.696 5410 5.149 4.909 4690,488 4.302 4.130 3970 23 1485753489 12 303 11.272 10.371 9580 883 8 266 7.718 7230 6.79263996044 57235432 5167 4925 4 703 4.499 4311 4.1373976 24 15 247 13.7991255011469 10529 9.70789858 348 7784 7283 68356434 6073 5.746 5451 5.182 4.937 4713 4.507 4318.41433981 25 15.622 1409452783 11.654 10.675 9.8230.077842278437330 6.87364646097 5 766 5.467.5.195 4948 4721 4.5144323 14713985 16 INDRE 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 in which has exceeded 25 each of the last three years. He has computed the cost and revenue estimates for each product as follows 1 35.000 Initial estatt Cost of twelve value al revenue and costs Stevens Varlsblo esperes Deprecatione Fired cut of potporating costa 150,000 1 172.000 1 08.000 1.000 140.000 1 225,000 3 105,000 300,000 The company's discount rate is 17% Click here to view Ext 1481 and Exhibit:14822. to determine the appropriate discount factor using tables, Required: 1 Calculate the payback period for each product 2. Calculate the net present value for each product 3. Calculate the internal rate of return for each product 4 Calculate the profitability index for each product 5. Calculate the simple rate of return for each product 6. For each measure, identify whether Product A or Product B is preferred Gh. Based on the simple rate of return, which of the two products should Lous des accept? XHIBIT 148-1 Present Value of $1.11 ) Periods 4% 5% 6% 7 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.963 0.952 0943 0935 0926 0917 0.909 0.001 0.092 0.885 0.877 0370 0.862 0655 OM 0.340 0.833 0.826 0 820 0.813 0 806 0.800 2 0925 0.90708900073 0.857 0.8420826 0812 0.797 0.783 0769 0756 0743 0731 0718 0706 0.694 0,683 0.672 0.661 0.650 0.640 3 08890.364 0.840 01516 0.794 0.772 0.751 0731 0712069306750658 0641 0624 060905930579 0.564 0551 0.537 0.524 0512 4 08950822.792 0.763 0.7950.708 06820659 0656 06110 592 0.572 052 OST405160409048210.467 0 451 0.437 0423 0410 5 0,022 0714 0.749021306010600621 0593 0.5670343 0519 0497 0.4760456 041704100402 0380 0.3700355 0.341 0.328 0 0.790 0.746 0.70 0600 0.610 0596 0.5640535 0.57 0.40 0456 049204100 3900 3700 3520315 0.11 0.003 0.200 0.2750.262 7 076007110065 06250553054710510420 45204250 4000 3700 3540333 0 114 0 29002790 2630 2490 2350 222 0210 07.0627 050 540 050 04670414 94040176 0510.327 0.105 0.285 0,2660249 0233 021802040191 0179 0.168 9 070310.04510592 0546 0.500 0.460.0.4240391 0361 0333 0.308 028402630243 0.225 0.209 0.1940 180 0.167 0.1550 1440,134 10 06760,0140556 5080463 0422 0.386 0.352 0322 0.295 0.270 0247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 11 06500585 0.5270475 0429 0388 03500 3170257 0267 0237 0215 0.19 0.178 0.163 0.14 0.125 01230.112 0.10 00940085 12 0.625.10.557 0 497.0464 0.207 0356 031002860257 02310 208 0,187 0.168 0.152 0137 0124 0112 0.102 0,002 0,083 0.076 0000 13 0.001 0.530.0 460 04150366 0 326. 0.290 0258 02290204 0.182 0163 0.1450 130 0.116 0.1000093 0.054 0.025 0.008 0.061 0.055 0 5770 505 0.442 0388 0340299 0 263 0.232 0.205 0.161 0.160 0.141 0.125 0.111 0.099 0.088 0.072 0.069 00620055 00490044 35 0555 0.4810417 0362 0315 0.275 0.299 0202 0 1830 160 01400123 0.108 0095 0.084 0078 0.005 0.053 0051 0.0450.000 0.035 10 0534 0 458 0 39403200292 0252 021801880 163 0.141 01230107 0.093 0.0810071 0062 0054 0.047 0.042 00360033 0028 17 0515 0.436 0.071 03170 2700 23101900-1700 146 0125 0.106 0093 0.0000069 0000 00520045 090034 0.030 0026 0.023 0.494 0.4160350 0.296 0.250 0.212 0.110 0.153 0.1300111 0095 0001 0.069 0059 0051 00140038 0.032 0.025 0.024 0.021 0.018 19 0475 0.396 0.331 0277 0212 MO1640138 0 116 00980063007000600051004300370031 0.027002002000170014 20 0.456 0377 0.312 0.250 0.215 0.17 0.140 0.1240106 0.087 00730061005100130.037 0031 0026 0.022 0.019 2016 0014 0012 21 0499 0.3590294 024210.1900.164 0.125 0.112 0.093 0.077 0.064 005 0044 007 0031 0,026 00220018001500100110 000 22 0.422 0.342 0.278 02260 1540.15001230.1010.083 0.0080056004600380032 0.0360022001800150013 0.0110.0090.007 23 10.406 0.32010220201 0 1700138 0.112100910074 0600 004900100033 0.027 0.022 000 0015 D0120010 0000 0.007 0006 24 0 3900 3100 247 0.197 0.15 0.120 0.102 0.002 0.005 003 004300350028 0.023 0.019 0015 0.013 0010 0005 0.007 0.006 0.005 25 0375 0295 0231 0184 0.146 0.116 0.092 00740090042 0.0380030 0.024 0020 DO 0011 0010 0.009 0.007 0.005 0005 0.004 EXHIBIT 148-2 Present Value of an Annuity of $1 in Arrears 111 1(1) Periods 4% 5% 6% 794 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0243 0935 0.926 0917 0.909 0.003 0.893 0.885 0 877 0.870 0.862 0.855 0.847084008330826 0.820 0.8130306 0.800 2 1.880 1859 1833 1808 1783 1.759 176 1690 1655 1 647 1620 1605 158515661547152841509. 1492 1.474 1457 1.440 3 2775 2723.2673 2624 2577253124872.444 2402 236123222283 2246 2210 2174 2140 2106 2074 2042 2011 1981 1952 4 3.630354634653387 3.312 3 240317031023037 29742.9142855 2.798 2.74326902639 2 589 2.540 24942448 2.404 2.362 5 4.452 43294212 4.100 3.9933890 3.791369037605 3.517 3433 335252225.1993.127 3056 2991 2920 28642.803 2.745 2689 5.242 5.076 49171 4.767 4.6234486 4355 4231 4 111 9983889 378436853.589 3.498 3.410 3.326 3245 3.167 3.092 3020 2951 6002 5.786 5582 5.389 5.206.5.035 4.8684712456444234288 4160 403939223 81297063605950831416332232423.161 8 6.733 6.46362103 971 57475.535 5.335 5.146 4.968 4.7994639 4.487 4344 4 207 40783.954 3.837 3.726 3.619 3.5103.421 329 9 7.435 71086502 65156247 5.995 5759 5537 53285 132 4946 4772 4607 4451 4.303416340313.905 3.786 3 6733.566 3.463 10 81117722730070246 710 6418 6.145 588956505.4265 216 50194 833 4659 4494 43394192 40543 923 3.799 3.682 3571 11 8.760 8.306788774997A139. 6.80564956 207 5.930 5.687 5.453 5 2345029483646564436 4327 4.177 4.035 2.902.770.656 12 9.385 8.863 B.3842.94375367,161 8.814 6492 6.1945 910 5.600 1420 5.1971 4 988 4793461144394270 412739853.85 3.725 13 9.986 9294 88538.35022904 7487 7/10367506424612258425.5835 342 5.118 4.910 4715 453 4162 4203 4053 3.912 3.780 14 10.563 9.8999 295 8.7458 244778623676.982 6 628 63026002 5724 5.466 52295.000 4802 4611 4.432 42654.108 3.9623.824 15 11.118 10 380 9712 9.103 550 06126062419168116.463 6.1425 342 55755.324 5.092 4876 4.67544894 315 4.1524001 3.859 16 11.652 10.838 10.100 9447 08513313782473796 974 6,604 6 265 5.9545.000 5.405 162 4939 4.730 45364 357 4.18940333.887 17 12.1681127410.4779763 9.1228544 B02275497.120 672963736047 5.749 SAYS 5 222 4990 4775 4.576 4 39142194059 3.910 TE 12.659 11 690 10.828 10 059 9.3228.7563 2012 702 725068406 467 | 6.128 5818 5534 5 273503348124608 4 419 43434.0803928 19 13.134 120851115810 33696046 950 365 2.83923666.938 6.5506.198 5877 5.504 5310 507048494635 4.442 4263 4,097 3942 20 13.590 12 462 11 470 10 594 98169.129 514 963 7 469 7025 6.623 62599 929 562553535.101 4870 4657 44604279 4.110 3.954 21 14029 1282111764 10836 100179292 8649 807517562 2.1026.687 6312159735.6655.384 5.1274,891 4675 4.476 4 292 4121 3.963 22 14.451 13.163 12 042 11 061 10 201 9.442 8.7728.176 17.6457,170 6743 6359 6011 5.696 5410 5.149 4.909 4690,488 4.302 4.130 3970 23 1485753489 12 303 11.272 10.371 9580 883 8 266 7.718 7230 6.79263996044 57235432 5167 4925 4 703 4.499 4311 4.1373976 24 15 247 13.7991255011469 10529 9.70789858 348 7784 7283 68356434 6073 5.746 5451 5.182 4.937 4713 4.507 4318.41433981 25 15.622 1409452783 11.654 10.675 9.8230.077842278437330 6.87364646097 5 766 5.467.5.195 4948 4721 4.5144323 14713985 16 INDRE
