Cardinal Company is considering a five-year project that would require a $2,955,000 investment inequipment with a useful life of five years and no salvage value. The company's discount rate is 18%. Theproject would provide net operating income in each of five years as follows:SalesVariable expensesContribution marginFixed expenses:out-of-pocket costsDepreciation$ 2,865,0001,015,0001,850,000Advertising, salaries, and other fixed$ 750,000591,000Total fixed expenses1,341,000$ 509,000Net operating incomeClick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) usingtable.Foundational 12-15 (Algo)15. Assume a postaudit showed that all estimates (including total sales) vlere exactly correct except for the variable expenseratio, which actually turned out to be 45%. What was the project's actual simple rate of return? (Round your answer to 2decimal places.)

Step 1:Actual Net Present Value (NPV):Year 1:Sales: $2,865,000Variable expenses: $2,865,000 × 0.45 =…

Answered: Cardinal Company is considering a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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Cardinal Company is considering a five-year project that would require a $2,915,000 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 $ 2,863, 000 1,014,000 1,849,000 $ 781,000 583, 000 1,364, 000 $ 485,000 Net operating incone Click here to view Exhibit 148-1 ond Exhibit 148-2, to determine the appropriate discount factor(s) using table. 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 decimal places.) Simple rate of return
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. 5. What is the project profitability index for this project? (Round your answer to 2 decimal places.) Project profitability index %24
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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

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