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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 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) $ 370,00 0 $ 570,00 0 Annual revenues and costs: Sales revenues Variable expenses $ 400,00 0 $ 180,00 0 $ 74,000 $ 480,00 0 $ 214,00 0 $ 114,00 0 $ 68,000 Depreciation expense Fixed out-of-pocket operating costs $ 88,000 The company's discount rate is 20%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables DHIBIT -1 Pretant Value of the w 200 sz Periods 1 2 2 4 5 5 2 3 9 a D 5 UN 15 17 0.92 0.952 0943 0.035 0.926 0907 22 22 0.909 0.901 0393 0885 0.877087000055 05070110 080325 000 000 0.000 0.925 0.90703300373 0.557 030 0.326 0.812 0.797 0783 079 0756 090731 078 0706 0094 003 0.072 0600050 0.640 0.89 0.364 084008160794 0772 07510731 072 0600 0675 058 064 06040609 0591 0.579 05640551051 0534 0.12 0.955 01 0.792070307350200 0.683 0.659 0606060 0.582 05720552 0534 0.50499 0.482 046704510080023 0.480 0.922 0.784071 070 0601065006240.593 0567 050 051 0.497 046 0456 0437 0.40 0.400 0.70 0.3550341 8333 0.790 0.746 0J05 06060690 0.596 0564 0535 0507 0.400 0.456 0.422 0.40 0.390 0.370 0.362 0.335 0.19 0.300 029 0275 0.20 07300711 0065 0623 0.583 0507 053 04820452 0425 0.400 0176 0354 03370214 0295 0279 0.23 024 0235 0.22 0.20 0731 0.677 0.627 0582 0540 0.502 0.467 0.434 0004 0.378 0351 0.32 0.305 0285 0.20 0.209 023 020 0204 031 01 O 0.03 0545 0.592 054 0.500 0.460 0424 0391 0361 0333 098 024 0203 0203 0225 0209 0154 01500357 01550344 0134 067666140558 0508 0463 0422 036 0352 0322 0295 0270 0247 0.227 0208 0191 001 OM 0100 0 00006 0102 0650 055 0527 0.475 0429 0388 0350 0.37 0287 0201 0231 021501980178 ON 0548 0005 012201120000054 000 0.625 055104970441 0397 0.356 0.319 0286 0.257 0231 0208 0987 0168 0152 0137 0124 0112 0.002 0.002 0.000 0.000000 0.001 0.530 041904150368 0.220 290 0.258 0229 0204 012 0:13 0:45 0130 0.116 01040093 000 0.075 000 000055 0:577 0.505 0.4420388 0.340 0299 02000232 0.205 0101000 005 oft 0.099 0.008 0.078 000 0062 0096 00100044 055 0.400.41 0.362 0.31502750239 0209 0183 098001400123 0.305 0.095 0064 0.014 0.00500570051009500600035 0.534 0.458 0394 0.309 0292 0.252 020801360363 01 0123 0.07 0.093 0001 0.071 0002 0054 00070012 0.030 0032 0.00 0.513 0.036 037 03170270 0210.190 0:10 014601250100 0000 0000 0009 0.060 0,052 0045 0.0000054 00:30 00 0033 0.64 0.450.350 0.295 0.250 0212 000 0:53 0130 0.055 0.061 0009 0.059 0.051000000002 0028 0.094 0021001 0.4750306 0.3010277 0230 0194 094 00 0116 0.098 003 000 0000 0051 000 000 0001 000 000 0000 000014 0456 0377 0.32 0258 02150178 0100 0124 01040087 0.073 0001 0.091 000 0037 0001 0.026 0.022 000 000 000 000 0.439 030 0294 0242099 01654 Os 0.003 0.077 0064 005 0037 0001 0.0200022 0.01 000 000 000 000 0422034202730220001500123 001 0003 0.060 0,056 005 0.008 0.03200200022000055 000 000 0.000000 640601200220211 0170 013001 0.001 00N 0000 0.049 0040 0000 0027 0.002 0.00150.002 0010 0000 000 000 00:30 020 0197 0.158 0020 0.1020082 0006 005 000 0005 0.028 002 001 005 000 000 000 000 0005 0.005 0.375 025 023 0136 015 018 00920094 005 0067 0.005 0030 0.034 0020 0.0000 0.00 0.00 0.00 0.00 0.00 0.004 0361 021 0220 0172 0003060004 0.006 005 0002 003 0020 000 000 0.01 0.01 0.000 000 000 000 000 000 0300206 207 0:01 0005 0.09 0.075 0000 000 000 0029 0023 0.000 0.00009 000 0000 0005 004 0000003 03300255095015001 0.00 0.000 0.054 0042 003 002 0.030 00100110010 0.00 0.00 0.00 0.00 0.00 0.003 0002 0321 020 015 011 0070002 0063 004 003 0029 0022 000 0010on 0.0000006 0.00 0.00 0.0000000000002 0.00023 O011 00000075 005 004 0000 0026 0020 001010000 000 000 000 000 000 000 000 0001 0.200 000097 0067 000600120002 0.0000 0000 000 000 0000 0.00 0.00 0.00 0.00 0000 0000 0000 0000 0000 20 21 22 24 25 26 27 20 29 30 82F Mostly sunny O ere to search 59 BHAT 2 Value of an any of 1 in . 1 RE OOT USE 966 S05 STE 92 153 15 200 20 22 20 25 0902062090 09350926 090 09090901 0393 0865 0877 0370 0362 09550BE7 0940 9033 0.326 0.20 033 03050.300 WS 1783 19 173500 1000 1680 160 1620 1805 1505 1566 1567 1529 15091692 1457 1440 3 25 272 267 2531 2457 2444 2.402 2.38 2122 223 2246 2210 2174 2940 2006 207 2042 2on 1981 1952 300 35000 20 3.240 310 302 3007 294 294 2855 2.798 210 2090 209 239 2500 2454 243 244 2.362 5 LE2 4329 420 19933390379 366 3505 3.517 333 3352 3214 3199 3327 3050 2991 2926 2064 2300 25 2009 520 SON 155 417 3996 3.599 374 365 359 3.498 340 3:326 3345 3467 3092 3.020 2.951 7 300350 5525 5206 500 4.368 4712 454 4423 4285 4560 4059392230123.706 3.605 3.508 3.416 2327 321161 6733 620 570 555 530550 4799 1839 4.187 43420780781950 1337 3725 359 3598301329 30 620 57505537 5328 582 4545 472 467 4451 4303 4183 0 2905 176 1673 2565 1663 1722 1360 2024 60 65055389 5650 526 526 5019 4830 4.656454309 47924054 3523 1799 16622571 O 3067 749 200 60 6.435 6207 508 56875453 5234 5029 48364656 4406 4327 47 4055 3.5021752856 200 0.01464926794 5985600501 5191 40 40 4611 409 4270 407 1955 195 3725 7904 7 20006750 4 622 552 550 5342 51 4.910 4715 4533 47824293 4053 195270 1950 82 770 7367 662 669565026002 5724 5665 5229 5008 4102 460 *232 4.365 410290234 03007 3.559 100 7606 70 6852 612 557 5575 5224 5.092 486 4575 44943541532003159 10 80S 30 70042399346604 6.265 5954 5.000 5.405 5.362 4933 4730 458 459 89 0331 we 35 5.622 1509 2120 0.7296760475756755222990 475 4576 4 29 40590 25 23 1059 9.72 3756 201 7700 7250 6.540 645 608 55594 5.273503340 4600 4242040003528 0950 365 78097.3666938 655061985872 5564 516 507000544251190 TOTO 54919 154295374970256623 6258 5929 5628 5753 5301 40557 40042190 1029 2001 1540003252 50757582702 66.72 597) 5668 5354502 44404292 29 000 2012 3772 1776457570 6.15 50115.665.00 5100 4000 4400 2970 USD3012129500 176677 7230679296046 573 502 493503 520005299797 3.50577047203685 6.434 60735745545150 497 70 350 TES OTTO271000975766 55 2720 45 24 3. 796 73729066016 SSGO 5206 5572252012 021 20 1519074069355916035250 5251731154990 1060 9.30 602 79547 691654152 Smo 5502 223 24 25 300 1022 700 5.90 6.65152000 52299500 ST 1.000 30 2012 1057 T5500 3.029 559 5225 45 1534 2995 05113410 600 620 SS44100 4540399 18 1954 ERROR 17 5 me here to search 2 BT Mostly sunny Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 5. Calculate the simple rate of return for each product. 6a. 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

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