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 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. 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. Product B $ 400,000 $ 370,000 $ 178,000 $ 190,000 $ 270,000 $ 128,000 $ 38,000 $ 72,000 $ 80,000 $ 52,000 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?

Classify the different costs as unit, batch, product, or facility. Answers (unit, batch, product, or facility) may be used more than once and some answers may not be used at all. Research and development Electricity                                       Building security costs   Quality control      Design costs