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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 divisions 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:

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2. Calculate the net present value for each product.

3. Calculate the internal rate of return for each product.

4. Calculate the project profitability index for each product.

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 A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $180,000 S 390,000 $260,000 $124,000 36,000 71,000 S 360,000 S 174,000 S 78,000 S 51,000 The company's discount rate is 15%. Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor using tables. Required 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product B Payback period 2.77 years 2.89 years 2. Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.) Product A Product B Net present value

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