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Requirement 1, 2, 3, 4, 5, 6A, and 6B please! Lou Barlow, a divisional manager for Sage Company, has an opportunity to monufacture and sell
Requirement 1, 2, 3, 4, 5, 6A, and 6B please!
Lou Barlow, a divisional manager for Sage Company, has an opportunity to monufacture 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 19% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Producto Initial investments Cost of equipment (zero salvage value) $ 190,000 $ 400,000 Annual revenues and costs Sales revenues $ 270,000 $ 370,000 Variable expenses $ 128,000 $ 178,000 Depreciation expense $ 38,000 $ 80,000 Fixed out-of-pocket operating costs $ 72,000 $ 52,000 The company's discount rate is 17% Click here to view Exhibit 1981 and Exhiblt 148 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 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, which of the two products should Lou's division accept? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req3 Reg 4 Reg 5 Req 6A Reg 6B Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period years years Complete this question by entering your answers in the tabs below. Reg 2 Reg 1 Req3 Req 4 Reg 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 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Req 6B Calculate the internal rate of return for each product. (Round your percentage answers to 1 decimal place l.e. 0.123 should be considered as 12.3%.) Product B Product A % Internal rate of return % Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Req5 Req 6A Reg 6B Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Profitability index Complete this question by entering your answers in the tabs below. Req 6B Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place le. 0.123 should be considered as 12.3%.) Product A Product B Simple rate of return ( Req4 Req6A > Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Reg 6B For each measure, Identify whether Product A or Product B is preferred. Net Present Profitability Payback Internal Rate Simple Rate of Value Index Period of Return Return Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req3 Req4 Reg 5 Req 6A Req 6B Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A Accept Product B OReject both products Step by Step Solution
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