Cardinal Company is considering a five-year project that would require a $3,025,000 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 oper income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other out- of-pocket costs Depreciation Total fixed expenses Net operating income $610,000 605,000 $2,737,000 1,001,000 1,736,000 1,215,000 $ 521,000 (Hint: Use Microsoft Excel to calculate the discount factor(s).)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Cardinal Company is considering a five-year project that would require a $3,025,000 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 out-
of-pocket costs
Depreciation
Total fixed expenses
Net operating income
$610,000
605,000
Simple rate of return
(Hint: Use Microsoft Excel to calculate the discount factor(s).)
%
$2,737,000
1,001,000
1,736,000
7. What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places. i.e. 0.12342 should
be considered as 12.34%.)
1,215,000
$ 521,000
< Prev
7
8
S
9
10 of 10
Next >
Transcribed Image Text:Cardinal Company is considering a five-year project that would require a $3,025,000 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 out- of-pocket costs Depreciation Total fixed expenses Net operating income $610,000 605,000 Simple rate of return (Hint: Use Microsoft Excel to calculate the discount factor(s).) % $2,737,000 1,001,000 1,736,000 7. What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places. i.e. 0.12342 should be considered as 12.34%.) 1,215,000 $ 521,000 < Prev 7 8 S 9 10 of 10 Next >
S
Required införh
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $3,025,000 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 out-
of-pocket costs
Depreciation
Total fixed expenses
Net operating income
O Higher
$610,000
605,000
(Hint: Use Microsoft Excel to calculate the discount factor(s).)
O Lower
8. If the company's discount rate was 18% instead of 16%, would you expect the project's net present value to be higher, lower, or the
same?
O Same
$2,737,000
1,001,000
1,736,000
1,215,000
$ 521,000
< Prev
8 9
10 of 10 I
Next >
Transcribed Image Text:S Required införh [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $3,025,000 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 out- of-pocket costs Depreciation Total fixed expenses Net operating income O Higher $610,000 605,000 (Hint: Use Microsoft Excel to calculate the discount factor(s).) O Lower 8. If the company's discount rate was 18% instead of 16%, would you expect the project's net present value to be higher, lower, or the same? O Same $2,737,000 1,001,000 1,736,000 1,215,000 $ 521,000 < Prev 8 9 10 of 10 I Next >
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education