Cardinal Company is considering a five-year project that would require useful life of five years and no salvage value. The company's discount ra 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

Cardinal Company is considering a five-year project that would require useful life of five years and no salvage value. The company's discount ra 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

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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Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales $ 2,865,000 Variable expenses 1,015,000 Contribution margin 1,850,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 Depreciation 591,000 Total fixed expenses 1,341,000 Net operating income $ 509,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. rev: 05_11_2019_QC_CS-168512 8. What is the project’s simple rate of return for each of the five years?
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The Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $860,000 $510,000 Useful life 8 years 8 years Estimated annual netcash inflows for 8 years $130,000 $68,000 Residual value $42,000 $- Depreciation method Straight-line Straight-line Required rate of return 13% 13% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.) 2.62% 15.12% 3.23% 1.57%
Cardinal Company is considering a project that would require a $2,805,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000. The company's discount rate is 14%. The project would provide net operating income each year as follows: $2,741,000 1,125,000 1,616,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 642,000 Depreciation Total fixed expenses 481,000 1,123,000 $ 493,000 Net operating income Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: What is the present value of the equipment's salvage value at the end of five years? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.) Present value
Cardinal Company is considering a five-year project that would require a $2,845,000 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 $ 2,869,000 Variable expenses 1,126,000 Contribution margin 1,743,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 709,000 Depreciation 569,000 Total fixed expenses 1,278,000 Net operating income $ 465,000 See attached image to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. 1) Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer.) A - Sales B - Variable Expenses C - Advertising, salaries, and other fixed out-of-pocket costs expenses D - Depreciation expense
A project with the following costs are under consideration to determine its profitability. Using the IRR comparison, and an annual MARR of 10% compounded semiannually. determine if the project should be executed. First cost : $51,300 Semiannual operating cost : $10,000 Semiannual income : $20,000 : $20,,000 : 4 years Salvage value Life in years O a. IRR = 15% semiannual O b. IRR 15.83% semiannual O c. IRR 16.9% semiannual O d. IRR 18.7% semiannual
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The management of Ortega Manufacturing has three different proposals under consideration. The Accounting Department has prepared the following information: Proposal B $ 2,450,000 Proposal C $ 2,055,000 Initial investment Useful life of equipment Estimated salvage value Payback period Net present value discounted at 15%* Which of the above proposals generates the greatest annual cash flow? Multiple Choice Proposal A Proposal B Proposal C Proposal A $ 3,100,000 Cannot be determined with the given information 7 Years $0 4.2 Years $ (30,000) 7 Years $ 400,000 4.4 Years $ 21,600 7 Years $ 100,000 4 Years $ 15,800
Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. 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 $ 752,000 550,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s) using table Simple rate of return $ 2,849,000 1,122,000 1,727,000. % Foundational 12-15 (Algo) 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.) 1,302,000 $425,000
Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. EV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Project Y Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 3. Compute Project Y's accounting rate of return. Numerator: Accounting Rate of Return Denominator: Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 Accounting Rate of Return
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's payback period. Choose Numerator: Payback Period 7 Choose Denominator: = Payback Period Payback period =