QLou 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: 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 16%. 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. Product A $170,000 Product B $380,000 $250,000 $350,000 $120,000 $170,000 $34,000 $76,000 $70,000 $50,000

QLou 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: 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 16%. 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. Product A $170,000 Product B $380,000 $250,000 $350,000 $120,000 $170,000 $34,000 $76,000 $70,000 $50,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 1CE: The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:...

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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 (salvage value) 170000 380000 Annual revenues and costs Sales revenue 250000 350000 Variable expenses 120000 170000 Depreciation expense 34000 76000 Fixed out-of-pocket operating costs 70000 50000 The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-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 project…
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 17% 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) $ 176,600 $ 390,000 Annual revenues and costs: Sales revenues $ 260,000 $ 360,000 Variable expenses $ 124,000 $ 174,000 Depreciation expense $ 36,000 $ 78,000 Fixed out-of-pocket operating costs $ 71,000 $ 50,000 The company’s discount rate is 15%. Click here to view Exhibit 12B-1 and Exhibit 12B-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…
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) $ 180,000 $ 390,000 Annual revenues and costs: Sales revenues $ 270,000 $ 360,000 Variable expenses $ 130,000 $ 180,000 Depreciation expense $ 44,000 $ 86,000 Fixed out-of-pocket operating costs $ 80,000 $ 60,000 The company’s discount rate is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. Required: 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…
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) $ 180,000 $ 390,000 Annual revenues and costs: Sales revenues $ 270,000 $ 360,000 Variable expenses $ 130,000 $ 180,000 Depreciation expense $ 44,000 $ 86,000 Fixed out-of-pocket operating costs $ 80,000 $ 60,000 The company’s discount rate is 16%. 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.
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) $ 180,000 $ 390,000 Annual revenues and costs: Sales revenues $ 270,000 $ 360,000 Variable expenses $ 130,000 $ 180,000 Depreciation expense $ 44,000 $ 86,000 Fixed out-of-pocket operating costs $ 80,000 $ 60,000 The company’s discount rate is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. Required: 3. Calculate the internal rate of return for each product. Calculate the internal rate of return for each product. (Round your percentage answers to 1…
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…
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. PLEASE HELP CALCULATE THE FOLLOWING--- Required: 4. Calculate the profitability index for each product. 5. Calculate the simple rate of return for each product. 6a. For each…
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 revenues $ 250,000 $ 350,000 Variable expenses $ 120,000 $ 170,000 Depreciation expense $ 34,000 $ 76,000 Fixed out-of-pocket operating costs $ 70,000 $ 50,000 The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-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…
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 21% 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) $ 210,000 $ 420,000 Annual revenues and costs: Sales revenues $ 290,000 $ 390,000 Variable expenses $ 136,000 $ 186,000 Depreciation expense $ 42,000 $ 84,000 Fixed out-of-pocket operating costs $ 74,000 $ 54,000 The company’s discount rate is 19%. Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Product B…
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 23% 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) $ 290,000 $ 490,000 Annual revenues and costs: Sales revenues $ 340,000 $ 440,000 Variable expenses $ 154,000 $ 206,000 Depreciation expense $ 58,000 $ 98,000 Fixed out-of-pocket operating costs $ 79,000 $ 59,000 The company’s discount rate is 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. 4. Calculate the profitability index for each product. 5. Calculate the simple rate of return for each product. 6a. For each measure, identify…
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 23% 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) $ 300,000 $ 500,000 Annual revenues and costs: Sales revenues $ 350,000 $ 450,000 Variable expenses $ 160,000 $ 210,000 Depreciation expense $ 60,000 $ 100,000 Fixed out-of-pocket operating costs $ 80,000 $ 61,000 The company’s discount rate is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor using tables. Required: 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…
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 23% 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) $ 290,000 $ 500,000 Annual revenues and costs: Sales revenues $ 350,000 $ 450,000 Variable expenses $ 160,000 $ 210,000 Depreciation expense $ 58,000 $ 100,000 Fixed out-of-pocket operating costs $ 80,000 $ 60,000 The company’s discount rate is 16%. 4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.) 5. Calculate the simple rate of return for each product. (Round percentage answers to 1…