Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell...
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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 23% 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) 280,000 480,000 Annual revenues and costs Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $330,000 430,000 $152,000 202,000 $ 42,000 84,000 $ 78,000 60,000 The company's discount rate is 14% Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables Required 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B Payback period years years
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