80.2K

Verified Solution

Link Copied!

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a fiveyear period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 21% each of the last three years. He computed the following cost and revenue estimates for each product: The company's discount rate is 19%. Click here to view Exhibit 14B1 and Exhibit 14B2, to determine the appropriate discount factor(s) using tables. Required: 1. Calculate each product's payback period: 2. Calculate each product's net present value. 3. Calculate each product's internal rate of return. 4 . Calculate each product's profitability index. 5. Calculate each product's simple rate of return. Ga. 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? Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a fiveyear period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 21% each of the last three years. He computed the following cost and revenue estimates for each product: The company's discount rate is 19%. Click here to view Exhibit 14B1 and Exhibit 14B2, to determine the appropriate discount factor(s) using tables. Required: 1. Calculate each product's payback period: 2. Calculate each product's net present value. 3. Calculate each product's internal rate of return. 4 . Calculate each product's profitability index. 5. Calculate each product's simple rate of return. Ga. 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

Answer & Explanation Solved by verified expert

See Answer