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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 five- year period.

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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 five- year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product Product Initial Investment: cost of equipment (zero salvage value) $ 260,000 $ 470,000 Annual revenues and costs: Sales revenues $ 310,000 $ 410,000 Variable expenses $ 144,000 $ 194,000 Depreciation expense $ 52,000 $ 94,000 Fixed out-of-pocket operating costs $ 76,000 $ 58,000 The company's discount rate is 18%. Click here to view Exhibit 13B-1 and Exhibit 138-2. 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 project 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, Lou Barlow would likely: Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Reg 68 Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Payback period Product B years years Reg 2 > Reg 1 Real Reg 3 Reg 4 Reg 5 Reg 6A Reg 6B Calculate the net present value for each product. (Round your final answers to the nearest whole dollar amount.) Product A Product B Net present value Re1 Reg 3 > Req 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Req 6B Calculate the internal rate of return for each product. (Round your answers to 1 decimal place i.e. 0.123 should be consid as 12.3%.) Product A Product B Internal rate of return % % Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg 5 Reg 6A Reg 6B Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Project profitability index Reg 1 Reg 2 Reg 3 Reg 4 Reas Reg 6A Reg 68 Calculate the simple rate of return for each product. (Round your answers to 1 decimal place i.e. 0.123 should be considered as 12.3%) Product A Product B Simple rate of return 90

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