Question: all requirements please Problem 14-17 (Algo) Net Present Value Analysis; Internal Rate of Return; Simple Rate of Return [LO14-2, LO14-3, LO14-6] Casey Nelson is a
Problem 14-17 (Algo) Net Present Value Analysis; Internal Rate of Return; Simple Rate of Return [LO14-2, LO14-3, LO14-6] Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $5,380,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: Sales Variable expenses Contribution margin $4,000,000 2,160,000 2,640,000 Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 840,000 Depreciation 1,076,000 Total fixed expenses 1.916.000 Het operating income $724,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using tables. Required: 1. What is the project's net present value? 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? Complete this question by entering your answers in the tabs below
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