Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. 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 $2,739, 000 1, 100, 000 1, 639, 000 $641,000 578,000 1, 219,000 Net operating income $420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.)
Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. 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 $2,739, 000 1, 100, 000 1, 639, 000 $641,000 578,000 1, 219,000 Net operating income $420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...
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![Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating
income in each of five years as follows:
$2,739,000
1, 100,000
1,639, 000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs
Depreciation
Total fixed expenses
$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 appropriate discount factor(s) using table.
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8c845cf8-3d77-4ddd-9d5a-2a560adfc5de%2F47035cde-6e07-4cf5-9f3c-5f955a56a96b%2F6i1067l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating
income in each of five years as follows:
$2,739,000
1, 100,000
1,639, 000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs
Depreciation
Total fixed expenses
$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 appropriate discount factor(s) using table.
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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