v

1 )what is the projects net present value

2) What is the projects simple rate of return

3) What would the best investment opportunity,

U m mi ne present value of the proposed mining project. Should the project be accepted? Explain. PROBLEM 11-13A Net Present Value Analysis; Simple Rate of Return [LOII-2, LOT-4] Casey Nelson is a divisional manager for Pigeon 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. Casey is considering a capital budgeting project that would require a $3,500,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 16%. The project would provide net operating income each year for five years as follows: $3.400.000 $3,400,000 1,600,000 1,800,000 Sales Variable expenses .. Contribution margin ...... Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $700,000 700,000 1,400,000 $ 400,000