Cardinal Company is considering a five-year project that would require a $2,755,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 14%. The project would provide net operating income in each of five years as follows:   Sales   $ 2,875,000 Variable expenses   1,124,000 Contribution margin   1,751,000 Fixed expenses:     Advertising, salaries, and other fixed out-of-pocket costs $ 721,000   Depreciation 551,000   Total fixed expenses   1,272,000 Net operating income   $ 479,000   Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.   Foundational 14-8 (Algo) 8. What is the project’s simple rate of return for each of the five years? (Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Cardinal Company is considering a five-year project that would require a $2,755,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 14%. The project would provide net operating income in each of five years as follows:

 

Sales   $ 2,875,000
Variable expenses   1,124,000
Contribution margin   1,751,000
Fixed expenses:    
Advertising, salaries, and other fixed out-of-pocket costs $ 721,000  
Depreciation 551,000  
Total fixed expenses   1,272,000
Net operating income   $ 479,000

 

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.

 

Foundational 14-8 (Algo)

8. What is the project’s simple rate of return for each of the five years? (Round your answer to 2 decimal places.)

 

 
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