Question: I need help with this practice question Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two
I need help with this practice question



Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a fiveyear 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: The company's discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 5. Calculate the simple rate of return for each product. 6a. For each measure, identify whether Product A or Product B is preferred. 6b. Based on the simple rate of return, which of the two products should Lou's division accept? EXHIBIT 14B-1 Present Value of S1:1(1+r)n 14B2 Present Value of an Annuitv of $1 in Arrears: 1r[11(1+r)n]
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