Cardinal Company is considering a project that would require a $2,815,000 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 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 Depreciation Total fixed expenses $2,863,000 1,014,000 1,849,000 $781,000 483,000 1,264,000 $ 585,000 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 project's annual net cash inflows? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
Cardinal Company is considering a project that would require a $2,815,000 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 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 Depreciation Total fixed expenses $2,863,000 1,014,000 1,849,000 $781,000 483,000 1,264,000 $ 585,000 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 project's annual net cash inflows? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
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 $2,815.000 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 16%. The project would provide net operating income each year as follows:
$2,863,000
1,014,000
1,849,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
Depreciation
Total fixed expenses
$781,000
483,000
1,264,000
Net operating income
585,000
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 project's annual net cash inflows? (Round discount factor(s) to 3 decimal places and final answer to
the nearest dollar amount.)
Present value
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