The discount rate is 20%

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 22% 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) $380,00e $575,000 Annual revenues and costs Sales revenues Variable expenses Depreciation expense $410,000 $490,000 $186,00e $218,000 76,000 $115,000 Pisoed cutof pcket operating costs 289,0 5 70