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 An Opportunity To Manufacture And Sell One Of Two New Products Fo 1 (119.69 KiB) Viewed 10 times

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: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs The company's discount rate is 14%. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the profitability index for each product. 4. Calculate the simple rate of return for each product. Req 1 Complete this question by entering your answers in the tabs below. Reg 2 Product A 5a. For each measure, identify whether Product A or Product B is preferred. 5b. Based on the simple rate of return, which of the two products should Lou's division accept? Req 3 $ 220,000 $ 280,000 $ 130,000 $ 44,000 $ 73,000 Req 4 O Product B Req 5A $ 410,000 $ 380,000 $ 182,000 $ 82,000 $ 60,000 Req 5B Calculate the payback period for each product. (Round your answers to 2 decimal places.)