Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, L07-3, L07-5, L07-6] 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 25% 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) $ 340,090 $ 525,000 Annual revenues and costs: Sales revenues $ 380,000 $ 480, 000 Variable expenses $ 172, 000 $ 225,000 Depreciation expense 68, 000 $ 105, 000 Fixed out-of-pocket operating costs 83,006 66, 060 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 78-2, 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: Problem 7-23 (Algo) Comprehensive Problem [LO7-1, L07-2, L07-3, L07-5, LO7-6] 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 25% 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) $ 340, 000 $ 525, 090 Annual revenues and costs: Sales revenues $ 380,000 $ 480, 000 Variable expenses $ 172, 000 $ 225,000 Depreciation expense 68, 000 $ 105, 000 Fixed out-of-pocket operating costs 83, 000 $ 66, 090 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 78-2, 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: * Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reg 4 Req 5 Req 6A Req 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 $ 60,000 @ $ 79,800 Req 1 Req 3 >Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, L07-3, L07-5, LO7-6] 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 25% 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) $ 340, 000 $ 525, 900 Annual revenues and costs: Sales revenues $ 380, 000 $ 480,000 Variable expenses $ 172, 000 225, 060 Depreciation expense 68, 000 $ 105, 000 Fixed out-of-pocket operating costs 83, 000 66, 090 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 78-2, 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: Problem 7-23 (Algo) Comprehensive Problem [LO7-1, L07-2, L07-3, L07-5, L07-6] 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 25% 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) $ 340, 000 $ 525,000 Annual revenues and costs: Sales revenues $ 380, 000 $ 480,000 Variable expenses 172, 000 $ 225, 000 Depreciation expense $ 68, 000 $ 105, 000 Fixed out-of-pocket operating costs $ 83, 090 66, 000 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 78-2, 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: * Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Reg 4 Reg 5 Req 6A Req 6B Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Project profitability index Problem 7-23 (Algo) Comprehensive Problem [L07-1, L07-2, L07-3, L07-5, LO7-6] 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 25% 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) $ 340,000 $ 525,000 Annual revenues and costs: Sales revenues $ 380,000 $ 480, 000 Variable expenses $ 172, 000 225,006 Depreciation expense 68, 000 $ 105, 000 Fixed out-of-pocket operating costs 83, 000 $ 66, 090 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 78-2, 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: Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Req 4 Reg 5 Req 6A Req 6B 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 % % Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, L07-3, L07-5, L07-6] 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 25% 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) 340, 000 $ 525, 000 Annual revenues and costs: Sales revenues $ 380,000 $ 480, 000 Variable expenses $ 172, 000 225, 900 Depreciation expense $ 68, 000 105, 060 Fixed out-of-pocket operating costs 83, 000 66, 090 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 7B-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: * Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Req 4 Req 5 Req 6A Req 6B For each measure, identify whether Product A or Product B is preferred. Net Present Profitability Payback Internal Simple Index Rate of Value Period Rate of Return Return Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, L07-3, L07-5, LO7-6] 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 25% 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) $ 340, 000 $ 525, 000 Annual revenues and costs: Sales revenues $ 380,000 $ 480, 000 Variable expenses 172, 000 225, 000 Depreciation expense 68, 000 $ 105, 000 Fixed out-of-pocket operating costs 83, 000 66, 090 The company's discount rate is 17%. Click here to view Exhibit 78-1 and Exhibit 7B-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: * Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Reg 4 Req 5 Req 6A Req 6B Based on the simple rate of return, Lou Barlow would likely: JAccept Product A Accept Product B Reject both products