ONLY REQ 4

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 ralses are determined by his division's return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product Initial investment: Cost of equipment (zero salvage value); Annual revenues and costs: $ 170,000 $ 380,000 Sales revenues $ 250,000 $ 350,000 Variable expenses $ 120,000 $ 170,000 Depreciation expense $ 34,000 $ 76,000 Fixed out-of-pocket operating costs $70,000 $50,000 The company's discount rate is 16% Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback perlod 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Req3 Rey 4 Reg S Reg 6A Req60 Req 2 Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Profitability index 0.50 3 0.40 3 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 68 Req 6A Calculate the profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B Profitability index 0.50 0.48 Req 5 > Req 3