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.)
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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
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 | |
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education