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PLEASE HELP ME!!! Derrick lverson Is a divisional managerfor Holston Company. His annual pay raises are largely determined by his division's return on Investment {ROI},
PLEASE HELP ME!!!
Derrick lverson Is a divisional managerfor Holston Company. His annual pay raises are largely determined by his division's return on Investment {ROI}, which has been above 2596 each of the lastthree years. Derrick Is considering a capital budgeting project thatwould require a 54308000 investment In equipment vvith a useful life offlve years and no salvage value. Holston Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: Sales $4,188,888 Variable expenses 1,888,888 Contribution margin 2, 388,888 Fixed expenses: Advertising, salaries, and other Fixed out-o-F-pocket costs $ 365,888 Depreciation 948,888 Total Fixed expenses 1,6?5,888 Net operating income $ 5252986 Click here to view Exhibit YES-1 and Exhibit 78-2. to determine the appropriate discount factorqu using tables. Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return. 3a. Would the company want Derrick to pursue this Investmentopportunlty? 3b. Would Derrick be Inclined to pursue this Investmentopportunlty? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Red 3A Req 3B Compute the project's net present value. {Round your nal answer to the nearest whole dollar amount.)Step by Step Solution
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