solve Cardinal Company is considering a five-year project that would require a $2,765,000 investment in equipment with auseful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operatingincome in each of five years as follows:SalesVariable expensesContribution marginFixed expenses:Advertising, salaries, and other fixedout-of-pocket costsDepreciationTotal fixed expensesNet operating income$ 670,000553,000$ 2,851,0001,150,0001,701,0001,223,000$ 478,000 14. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio,which actually turned out to be 50%. What was the project's actual payback period? (Round your answer to 2 decimal places.)Payback periodShow Transcribed TextyearsSimple rate of returnGJ15. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio,which actually turned out to be 50%. What was the project's actual simple rate of return? (Round your answer to 2 decimal places.)

Solution: Payback period = Initial investment / Annual cash inflows Simple rate of return = Net…

Cardinal Company is considering a five-year project that would require a $2,765,000 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 670,000 553,000 $ 2,851,000 1,150,000 1,701,000 1,223,000 $ 478,000