Cardinal Company is considering a five-year project that would require a $2,855,000 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 $ 2,867,000 1,125,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $ 706,000 571,000 1,742,000 Total fixed expenses Net operating income 1,277,000 $ 465,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-3 (Algo) 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.) Present value
Cardinal Company is considering a five-year project that would require a $2,855,000 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 $ 2,867,000 1,125,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $ 706,000 571,000 1,742,000 Total fixed expenses Net operating income 1,277,000 $ 465,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-3 (Algo) 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.) Present value
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cardinal Company is considering a five-year project that would require a $2,855,000 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
$ 2,867,000
1,125,000
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed
out-of-pocket costs
Depreciation
$ 706,000
571,000
1,742,000
Total fixed expenses
Net operating income
1,277,000
$ 465,000
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
Foundational 12-3 (Algo)
3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.)
Present value
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