Answer Happy

Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return or investment (ROI), which has been above 22% each of the last three years. Casey is considering a capital budgeting project that was require a $3,800,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rat 18%. The project would provide net operating income each year for five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs Required: 1. What is the project's net present value? Depreciation Total fixed expenses Net operating income Click here to view Exhibit 148-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. 2. What is the project's internal rate of return to the nearest whole percent? 3. What is the project's simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-b. Would Casey be inclined to pursue this investment opportunity? $ 730,000 760,000 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A $ 3,700,000 1,720,000 1,980,000 Req 48 1,490,000 $ 490,000