Problem 8-23 Comprehensive Problem [LO8-1, LO8-2, L08-3, LO8-5, LO8-6] 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 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B $310,000 $ 510,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs $360,000 $164,000 $ 62,000 $ 81,000 $ 460,000 $ 214,000 $ 102,000 61,000 $ The company's discount rate is 21%. Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Answer is complete and correct. Product A Product B Payback period 2.70 years 2.76 years 2. Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.) Answer is complete and correct. Product A Product B Net present value $ 26,490 $ 31,310 3. Calculate the internal rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and round discount factor(s) to 3 decimal places.) Answer is complete but not entirely correct. Product A Product B 24.0 X % Internal rate of return 25.0 % 4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.) Answer is complete and correct. Product A Product B 0.06 Project profitability index 0.09 5. Calculate the simple rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.) Answer is complete but not entirely correct. Product A 37.1 X % Product B 36.3 X % Simple rate of return