Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products fo

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Lou Barlow, a divisional manager for Sage Company, has anopportunity to manufacture and sell one of two new products for afive-year period. His annual pay raises are determined by hisdivision’s return on investment (ROI), which has exceeded 22% eachof the last three years. He has computed the cost and revenueestimates for each product as follows:
The company’s discount rate is 20%.
Click here to view Exhibit 7B-1 and Exhibit 7B-2,to determine the appropriate discount factor using tables.
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 project profitability index for eachproduct.
5. Calculate the simple rate of return for each product.
6a. For each measure, identify whether Product A or Product B ispreferred.
6b. Based on the simple rate of return, Lou Barlow wouldlikely:
Calculate the payback period for each product. (Round youranswers to 2 decimal places.)
Calculate the net present value for each product. (Roundyour final answers to the nearest whole dollar amount.)
Calculate the internal rate of return for eachproduct. (Round your answers to 1 decimal place i.e. 0.123should be considered as 12.3%.)
Calculate the project profitability index for eachproduct. (Round your answers to 2 decimal places.)
Calculate the simple rate of return for eachproduct. (Round your answers to 1 decimal place i.e. 0.123should be considered as 12.3%.)
For each measure, identify whether Product A or Product B ispreferred.
Based on the simple rate of return, Lou Barlow would likely: