Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return oninvestment (ROI). which has been above 21% each of the last three years. Casey is considering a capital budgeting project that wouldrequire a $3.700.000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is17%. The project would provide net operating income each year for five years as follows:SalesVariable expensesContribution marginFixed expenses:Advertising, salaries, and otherfixed out-of-pocket costsDepreciationTotal fixed expenses$ 3,600, 00e1,680, 0801,928, 000$720, 000740,e001,460,000460, 000Net operating incomeClick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.Requlred:1. What is the project's net present value?2 What is the project's internal rate of return?3. What is the project's simple rate of return?4-a. Would the company want Casey to pursue this investment opportunity?4-b. Would Casey be inclined to pursue this investment opportunity?Complete this question by entering your answers in the tabs below.Req 1Req 2Req 3Req 4AReg 48What is the project's net present value? (Round your final answer to the nearest whole dollar amount.)Net present value

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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 21% each of the last three years. Casey is considering a capital budgeting project that would require a $3.700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 17%. The project would provide net operating income each year for five years as follows: $ 3,600, 00e 1,680, 000 1,920,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $720, eee 748,e0e 1,468,000 460, 00e Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project's net present value? 2 What is the project's internal rate of return? 3 What is the oroiect's simple rate of return?

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 21% each of the last three years. Casey is considering a capital budgeting project that would require a $3.700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 17%. The project would provide net operating income each year for five years as follows: $ 3,600, 00e 1,680, 000 1,920,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $720, eee 748,e0e 1,468,000 460, 00e Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project's net present value? 2 What is the project's internal rate of return? 3 What is the oroiect's simple rate of return?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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