Sage Company | Good Grade Guarantee!
low, 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 (RO), which has exc 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 s 229,980 410,096 288,000 388,800 138,000 182,800 44,800 82,080 $ 73,000 % 6e, 000 The cormpany’s discount rate is 14%. Click here to view Exhibit 138-1 and Exhibit 138-2, to determine the appropriate discount factor using tables Required 1. Colculate the payback period for each product 2. Colculate the net present value for each product 3. Calculate the internal rate of return for each product 4. Calculate the project profitobility index for each product 5. Colculate the simple rate of return for each product 60. For each measure, identify whether Product A or Product B is preferred 6b. Based on the simple rate of return, Lou Barlow would likely
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