SIMPLE-Managerial-Accounting-assignment-help-

 Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his divisionâ€™s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a \$4,200,000 investment in equipment with a useful life of five years and no salvage value. Holston Companyâ€™s discount rate is 18%. The project would provide net operating income each year for five years as follows:
 Sales \$ 3,600,000 Variable expenses 1,550,000 Contribution margin 2,050,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs \$700,000 Depreciation 700,000 Total fixed expenses 1,400,000 Net operating income \$ 650,000
 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

 1 Compute the project’s net present value. (Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest dollar amount.)

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 2 Compute the project’s simple rate of return. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.)

3-a.

Would the company want Derrick to pursue this investment opportunity?

 Yes No

3-b.

Would Derrick be inclined to pursue this investment opportunity?

 Yes No

equired: