Exercise $12-9($Algo$)$ Net Present Value Analysis and Simple Rate of Return $[$LO$12-2,$ L$012-6]$

Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment $($ROI$),$ which has been above $20\%$ each of the last three years. Derrick is considering a capital budgeting project that would require a $$3,080,000$ investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is $17\%.$ 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

Depreciation

Total fixed expenses

Net operating income

$$2,700,000$

$1,100,000$

$1,600,000$

$$620,000$

$616,000$

$\backslash$table$[[1,236,000$