I need help filling out the empty cells **Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, LO7-3, LO7-5, LO7-6]**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 19% 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) | $390,000 | $400,000 || **Annual revenues and costs:** | | || Sales revenues | $270,000 | $370,000 || Variable expenses | $128,000 | $178,000 || Depreciation expense | $38,000 | $80,000 || Fixed out-of-pocket operating costs | $72,000 | $52,000 |The company’s discount rate is 17%.Click here to view [Exhibit 7B-1](#) and [Exhibit 7B-2](#) to determine the appropriate discount factor using tables.**Required:**1. Calculate the payback period 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?Complete this question by entering your answers in the tabs below.- Req 1- Req 2- Req 3- Req 4- Req 5- Req 6A- Req 6B**Calculate the simple rate of return for each product.** *Note: Round your percentage answers to 1 decimal place i.e. 0.123 should be considered as 12.3%.*| | **Product A** | **Product B** ||---------------- **Problem 7-23 (Algo) Comprehensive Problem [LO7-1, LO7-2, LO7-3, LO7-5, LO7-6]**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 19% 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) | $190,000 | $400,000 || Annual revenues and costs: | | || Sales revenues | $270,000 | $370,000 || Variable expenses | $128,000 | $178,000 || Depreciation expense | $38,000 | $80,000 || Fixed out-of-pocket operating costs | $72,000 | $52,000 |The company's discount rate is 17%.Click here to view Exhibit 7B-1 and Exhibit 7B-2 to determine the appropriate discount factor using tables.**Required:**1. Calculate the payback period 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.6. For each measure, identify whether Product A or Product B is preferred. 6a. Based on the simple rate of return, which of the two products should Lou’s division accept?**Complete this question by entering your answers in the tabs below.**| | Reg 1 | Reg 2 | Reg 3 | Reg 4 | Reg 5 | Reg 6A | Reg 6B ||---------|-------|-------|-------|-------|-------|--------|--------|| Net Present Value | | | | | | | || Profitability Index | | | | | | | || Payback Period | | | | | |

1. Payback Period: It's the time taken to recover the initial investment.Formula: Payback Period =…

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 19% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product B Product A $ 190,000 $ 270,000 $ 128,000 $ 38,000 $ 72,000 Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs The company's discount rate is 17%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. $ 400,000 $ 370,000 $ 178,000 $ 80,000 $ 52,000 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?

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