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 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B $200,000 $410,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $280,000 $132,000 $ 40,000 $ 73,000 $ 380,000 $ 182,000 $ 82,000 $ 53,000 The company's discount rate is 18%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A 5.71 years Product B 6.51 years Payback period Calculate the net present value for each product. (Use the appropriate table to determine the discount factor(s).) Product Product B Product A $ 34,538 Net present value 43,440 3. Calculate the project profitability index for each product. (Use the appropriate table to determine the discount factor(s). Round your answers to 2 decimal places.) Product A Product B Project profitability index 4. Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. T.e. 0.1234 should be considered as 12.3% and use the appropriate table to determine the discount factor(s)) Product A 17.5 % Product B 15.4% Simple rate of return 5a. For each measure, identify whether Product A or Product B is preferred. Net Present Value Profitability Index Payback Period 5b. Based on the simple rate of return, Lou Barlow would likely: Accept Product A Accept Product B Reject both products EXHIBIT 118-1 Present Value of 51: Periods 1 2 0 3 4 5 8 9 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 10% 17% 10% 10% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.043 0.035 0.926 0.917 0.000 0.901 0.893 0.885 0.877 0.870 0.362 0.855 0.847 0.840 0.833 0825 0.820 0.813 0.B08 0.800 .025 0.007 0.200 0.873 0.57 0.542 0 8.26 0.812 0.797 0.783 0.750 0.756 0.743 0.731 0.718 0.706 0 604 068 0672 0.061 0.650 0.640 OBRO 0. 4 0 3.40 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.558 0.541 0.824 0.609 0.593 0.579 0.584 0.551 0.537 0.524 0512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.518 0.499 0.482 0.467 0.451 0.437 0.423 0.410 0.022 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.356 0.341 0.328 0.790 0.746 0.705 0.000 0.630 0.506 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.362 0.335 0.310 0.303 0289 0.275 0.262 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.375 0.354 0.333 0.314 0.296 0.270 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0.627 0 582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.25 0.206 0249 0.233 0218 0.204 0.191 0.17 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.500 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.101 0.176 0.162 0.140 0.137 0.126 0.116 0.107 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0237 0.215 0.195 0.17 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.096 0.625 0 557 0.497 0.444 0.397 0.356 0.310 0.286 0.25% 0.231 0209 0.187 0.16 0.152 0.137 0.14 0.112 0.102 0.092 0.083 0.078 0.069 0.001 0.530 0.400 0.415 0. 8 0.326 0.200 0.250 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.04 0.003 0.014 0.075 0.088 0.061 0.055 0.577 0.505 0.442 0.388 0.340 0.200 0.263 0.232 0.205 0.11 0.160 0.141 0.125 0.111 0.000 0.008 0.078 0.000 0.062 0.065 0.049 0.044 0.556 0.481 0.417 0.362 0.315 0.275 0.230 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0,084 0,074 0.065 0.057 0.051 0.045 0.040 0.035 0.534 0.458 0.394 0.330 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.002 0.054 0.047 0.042 0.036 0.032 0.028 0.513 0.436 0.371 0.317 0.270 0.231 0.19 0.170 0.146 0.125 0.10B 0.00 0.00 0.00 0.00 0.052 0.045 0.030 0.034 0.030 0.025 0.023 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.475 0.396 0.331 0.277 0.232 0.104 0.164 0.138 0.116 0.008 0.083 0.070 0.000 0.051 0.043 0.037 0,031 0.027 0,023 0.020 0.017 0.014 0.456 0.377 0.312 0.258 0.215 0.178 0.140 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.025 0.022 0.019 0.016 0.014 0.012 0.430 0.350 0.294 0242 0.190 0.164 0.135 0.112 0.003 0.077 0.064 0.063 0.044 0.037 0.001 0.026 0.022 0.018 0,015 0.013 0.011 0.009 0.422 0.342 0.278 0.22 0.184 0.150 0.123 0.101 0.083 0.008 0.056 0.046 0.008 0.002 0.025 0.022 0.018 0015 0.013 0011 0.009 0.007 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.001 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.390 0.310 0.247 0.197 0.158 0.125 0.102 0.002 0.005 0.053 0.043 0.035 0.028 0.023 0.019 0015 0.013 0.010 0.008 0.007 0.005 0.005 0.375 0.296 0.233 0.184 0.146 0.116 0.002 0.074 0.059 0047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.000 0.007 0.005 0.005 0.004 0.361 0281 0220 0.172 0.135 0.105 0.014 0.066 0.053 0.042 0.033 0.025 0.021 0.017 0.014 0.01 0.000 0.007 0.006 0.005 0.004 0.003 0.347 0.20 0.207 0.161 0.125 0.008 0.076 0.060 0.047 0.007 0.000 0.023 0.018 0.014 0.0110.000 0.007 0.006 0.005 0.004 0.003 0.002 0.333 0.265 0.106 0.150 0.116 0.000 0.00 0.054 0.042 0.003 0.026 0.020 0.016 0.012 0.010 0.008 0.005 0.005 0.004 0.003 0.002 0.002 0.321 0.243 0.165 0.141 0.107 0.002 0.063 0.048 0.037 0.025 0.022 0.017 0.014 0.011 0.003 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0303 0.21 0.17 0.131 0.000 0.075 0,057 0.00 0.000 0.026 0.020 0.015 0.012 0.00 0.007 0.005 0.004 0.003 0.000 0.002 0.002 0.001 0.200 0.142 0.007 0.067 0.046 0.002 0.002 0.015 0.011 0.008 0.005 0.004 0.00 0.00 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 110-2 Present Value of an Annuity of S1 in Arrears: Periods 4 14 15 4% 5% 6% 7% 8% 0% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.002 0.052 0.043 0.035 0.926 0.917 0.000 0.001 0.893 0.885 0.877 0.870 0.362 0.855 0 847 0 840 0.833 0.826 0.820 0.813 0.806 0.800 1 RB 1.850 1833 1808 1.783 1.750 1.736 1.713 1.690 1.668 1.647 1.620 1.805 1,585 1566 1.547 1.528 1.609 1.492 1.474 1.457 1440 2.775 2.723 2673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.108 2.074 2.042 2011 1.081 1.952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2 589 2.540 2.404 2.448 2.404 2.362 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.2425.078 4.917 4.767 4.623 4.485 4.355 4 231 4.111 3.999 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5 582 5.389 5.206 5.033 4.868 4.712 4.564 4423 4288 4.160 4.000 3.022 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 6.463 6210 5.971 5.747 5.535 5.305 5.146 4.068 4.799 4.639 4.487 4344 4 207 4,078 3.954 3.837 3.726 3.619 3518 3.421 3329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5 329 5.130 4.916 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.650 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4,836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 0.385 8.863 8.384 7.943 7.536 7.161 6,814 6.492 6.194 5.918 5.660 5.421 5.197 4.088 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4203 4.053 3,012 3.780 10.563 0.399 9.295 8.745 8.244 7.786 7367 6.082 6,628 6.302 6.002 5.724 5,468 5220 5.000 4.802 4.611 4.432 4265 4.108 3,062 3.824 11.118 10.380 9.712 9.108 8.550 8.061 7.606 7.101 6,811 6.462 6.142 5.847 5,575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.850 11.652 10.838 10.106 9.447 8,851 8.313 7.824 7.379 6.974 6.604 6.265 5.054 5,608 5,405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 12 166 11 274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5,740 5.475 5 222 4.000 4.775 4.578 4.391 4.219 4.059 3.910 12.650 11.690 10 828 10.05093728.756 8 201 7.702 7.250 6.840 6.467 6.128 5,818 5,534 5.273 5,033 4.812 4.60 4.419 4.243 4.080 3.928 13 134 12085 11.158 10.336 9.604 8.050 8.365 7839 7 366 6.939 6.550 6.108 5,877 5.5645 316 5,070 4.843 4.635 4.442 4263 4.097 3.942 13.590 12.462 11.470 10.594 0.818 9.129 8.514 7.963 7.469 7.025 6.623 6.250 5.920 5.628 5.353 5.101 4870 4.657 4.460 4270 4.110 3.954 14.029 12 21 11.764 10.838 10.017 9.292 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5384 5.127 4.891 4.675 4.478 4.292 4.121 3.963 14.451 13 163 12 042 11.051 10 201 944287728.176 7.645 7.170 6.743 6.350 6.011 5.606 5410 5.149 4 900 4.690 4488 4.302 4.130 3.970 14.857 13.489 12 303 11.272 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6,044 5.723 5.432 5.167 4.925 4.703 4.499 4311 4.137 3.976 15 247 13.799 12 550 11.469 10.529 9.707 8085 8.348 7.784 7283 6.835 6.434 6073 5.745 5.451 5.182 4937 4.713 4507 4318 4.141 3981 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.454 6.097 5.786 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.963 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7372 6.906 6.491 6.118 5.783 5.480 5.206 4,956 4.728 4.520 4328 4.151 3.988 16.330 14.643 13 211 11.987 10,915 10.027 9.237 8.548 7,943 7.400 6.935 6.514 8.136 5.798 5.492 5215 4.964 4.734 4.524 430 4.154 3.990 16.663 14.898 13.406 12. 137 11.051 10.116 0.307 8.602 7984 7.441 6.961 8.534 6.152 5810 5502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 16.084 15.141 13.591 12 278 11.15 10.198 0.370 8.650 8022 74706.083 6.551 6.106 5.820 5510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 17.292 15.372 13.765 12.400 11.258 10.274 0.427 8.694 8.055 7.496 7.003 6.568 8.177 5.829 5,517 5.235 4.979 4.746 4.534 4.330 4.160 3.995 10.703 17.250 15.046 13.332 11.025 10.757 0.770 3.051 8244 7.634 7.105 6.642 233 5.871 5.548 5.258 4.907 4.760 4.544 4.347 4.160 3.990 16 17 10 21 22 23 25 26 28 29 30 10