Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with auseful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operatingincome in each of five years as follows:SalesVariable expensesContribution marginFixed expenses:Advertising, salaries, and otherfixed out-of-pocket costsDepreciationTotal fixed expenses$2,739,0001,100, 0001,639,000$641, 000578, 0001,219,000$ 420,000Net operating income$Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.Required:1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single clickthe box with the question mark to produce a check mark for a correct answer and double click the box with the question mark toempty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Required:1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single clickthe box with the question mark to produce a check mark for a correct answer and double click the box with the question mark toempty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)? Sales? Variable expenses? Advertising, salaries, and other fixed out-of-pocket costs expenses? Depreciation expense

Solution: "Depreciation expense" on the income statement will not effect cash flows.

Cardinal Company is considering a five-year project that would require a $2,890, useful life of five years and no salvage value. The company's discount rate is 12% 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 $2,739,000 1,100,000 1,639,000 $641,000 578, 000 1,219, 000 $ 420,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the annronriate dirr

Cardinal Company is considering a five-year project that would require a $2,890, useful life of five years and no salvage value. The company's discount rate is 12% 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 $2,739,000 1,100,000 1,639,000 $641,000 578, 000 1,219, 000 $ 420,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the annronriate dirr

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,800,000 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 $ 2,845,000 1,109,000 1,736,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 799,000 Depreciation 560,000 Total fixed expenses 1,359,000 $ 377,000 Net operating income Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 6. What is the project's internal rate of return? Project's internal rate of return %
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Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 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 $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 1,330,000 $ 405,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. O Higher O Lower O Same 10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be higher, lower, or the same?
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues $ 155,000 $ 65,000 $ 9,000 $ 14,500 $ 300,000 Variable expenses $ 145,000 Fixed out-of-pocket operating costs $ 75,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Net present value Required: Calculate the net present value of this investment opportunity. Note: Round your final answer to the nearest whole dollar amount.
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,810,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. 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 $782,000 562,000 Simple rate of return $2,847,000 1,121,000 1,726,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. % 1,344,000 $ 382,000 15. 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 45%. What was the project's actual simple rate of return? (Round your answer to 2…
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 130,000 $ 60,000 8,000 $ 12,000 $ When the project concludes in four years the working capital will be released for investment elsewhere within the company. $250,000 $ 120,000 $ 70,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. $ Required: Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.) Net present value 3
A company is planning to purchase a machine that will cost $34,800, will have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales Costs: Manufacturing Depreciation on machine Selling and administrative expenses Income Multiple Choice O O O 3 5.80% 5.17% 50.00% 17.24%. 33.33%. E $ 105,000 $ 51,200 5,800 45,000 (102,000) $ 3,000 80 F3 a F4 F5 F6 54 85 R D F ןד C V 6 & 7 T Y DII F7 F8 F9 F10 U 8 9 0 0 G H J K L B N M P