Cardinal Company is considering a project that would require a $2,810,000 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 $500,000 The company's discount rate is 16%. The project would provide net operating income each year as follows Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $782,000 462,000 Depreciation Total fixed expenses Net operating income $2,847,000 1,121,000 1,726,000 1,244,000 $ 482,000 Required: If the equipment's salvage value was $700,000 instead of $500,000, what would be the project's simple rate of return? (Round your answer to 2 decimal places.) Sample rate of retium
Cardinal Company is considering a project that would require a $2,810,000 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 $500,000 The company's discount rate is 16%. The project would provide net operating income each year as follows Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $782,000 462,000 Depreciation Total fixed expenses Net operating income $2,847,000 1,121,000 1,726,000 1,244,000 $ 482,000 Required: If the equipment's salvage value was $700,000 instead of $500,000, what would be the project's simple rate of return? (Round your answer to 2 decimal places.) Sample rate of retium
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Cardinal Company is considering a project that would require a $2,810,000 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 $500,000 The company's
discount rate is 16%. The project would provide net operating income each year as follows:
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $782,000
Depreciation
462,000
Total fixed expenses
Net operating income
$2,847,000
1,121,000
1,726,000
1,244,000
$ 482,000
Required:
If the equipment's salvage value was $700,000 instead of $500,000, what would be the project's simple rate of return? (Round your
answer to 2 decimal places.)
Simple rate of retum
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