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Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely...

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Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on Investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,050,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 16%. The project would provide net operating income each year for five years as follows: $2,500,000 1.050,000 1,550,000 Sales Variable expenses Contribution argin Tixed expenses Advertising. salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Bet operating income $ 600,000 610,000 1,210.000 340,000 Click here to view Exhibit 78-1 and Exhibit 78-2. to determine the appropriate discount factors) using tables, Required: 1. Compute the project's net present value. 2. Compute the project's simple rate of return 3a. Would the company want Derrick to pursue this investment opportunity? 36. Would Derrick be inclined to pursue this investment opportunity

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