Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one...

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Lou Barlow, 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 (ROI), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs Product A $ 370,000 $ 400,000 $ 180,000 $ 74,000 Product B $570,000 $ 480,000 $ 214,000 $ 114,000 $ 88,000 $ 68,000 The company's discount rate is 20%. Click here to view Exhibit 148-1 and Exhibit 1482. to determine the appropriate discount factor using tables. 4. Calculate the profitability Index for each product. 5. Calculate the simple rate of return for each product. 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. 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? Req 1 Req 2 Simple rate of return Product A Req 3 1%1 Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place l.e. 0.123 should be considered as 12.3%.) Product B Req 4 1% Req 5 Req 6A Req 68 For each measure, identify whether Product A or Product B is preferred. Net Present Profitability Value Index Internal Rate Simple Rate of of Return Return Payback Period Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A Accept Product B Reject both products Lou Barlow, 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 (ROI), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs Product A $ 370,000 $ 400,000 $ 180,000 $ 74,000 Product B $570,000 $ 480,000 $ 214,000 $ 114,000 $ 88,000 $ 68,000 The company's discount rate is 20%. Click here to view Exhibit 148-1 and Exhibit 1482. to determine the appropriate discount factor using tables. 4. Calculate the profitability Index for each product. 5. Calculate the simple rate of return for each product. 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. 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? Req 1 Req 2 Simple rate of return Product A Req 3 1%1 Calculate the simple rate of return for each product. (Round your percentage answers to 1 decimal place l.e. 0.123 should be considered as 12.3%.) Product B Req 4 1% Req 5 Req 6A Req 68 For each measure, identify whether Product A or Product B is preferred. Net Present Profitability Value Index Internal Rate Simple Rate of of Return Return Payback Period Based on the simple rate of return, which of the two products should Lou's division accept? Accept Product A Accept Product B Reject both products