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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 17% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product All Product B Initial investment: Cost of equipment (zero salvage value) $180,000 $ 390,000 Annual revenues and costs: Sales revenues $260,000 $360,000 Variable expenses $124,000 $ 174,000 Depreciation expense $ 36,000 $ 78,000 Fixed out-of-pocket operating costs $ 71,000 $ 51,000 The company's discount rate is 15% Uso Excel or a financial calculator to solve any time value of money problems. Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B years Payback period years 2. Calculate the net present value for each product. (Round answers to the nearest dollar.) Product A Product B Net present value 3. Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product Project profitability index B 4. Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. Le 0.1234 should be considered as 12.3%) Product Product B Simple rate of return fa For each measure, dertly whether Product A or Product B is preferred Net Present Profitability Payback Value Period Index 5b. Based on the simple rate of return, Lou Bartow would likely: Accept Product Accept Product Reject both products

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