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 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial Investment: Cost of Equipment (zero salvage value) $170,000 $380,000 Annual Revenues and Costs: Sales Revenue $250,000 $350,000 Variable expenses $120,000 $170,000 Depreciation Expenses $34,000 $76,000 Fixed out-of-pocket operating costs $70,000 $50,000 The companyʻs discount rate is 16% Calculate the net present value for each product
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
Product A Product B
Initial Investment:
Cost of Equipment (zero salvage value) $170,000 $380,000
Annual Revenues and Costs:
Sales Revenue $250,000 $350,000
Variable expenses $120,000 $170,000
Fixed out-of-pocket operating costs $70,000 $50,000
The companyʻs discount rate is 16%
Calculate the
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