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Traya, a divisional manager for the Sage company, has the chance to produce and market one of the two new products for a period of

Traya, a divisional manager for the Sage company, has the chance to produce and market one of the two new products for a period of five years. His division's return on investment (ROI), which has exceeded 18% each of the last three years, is what determines how much he is paid annually. For each product, he has calculated the cost and revenue projections. Particular Product A Product B Initial Investment: Cost of equipment (zero salvage value) $170,000 $380,000 Annual Revenues and Cost: Sales revenues $250,000 $350,000 Variable expenses $120,000 $170,000 Depreciation Expenses $34,000 $76,000 Fixed out of pocket operating costs $70,000 $50,000 The companys discount rate is 16%. Required: Calculate the Payback period for: a) Product A ...............................year. b) Product B ...............................year.

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