Cardinal Company is considering a project that would require a $2,915,000 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 $300.000. The company's discount rate is 12%. The project would provide net operating income each year as follows: $2,746, 000 1,126, 000 1,620, 000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out -of-pocket $ 615, 000 523, 000 costs Depreciation Total fixed expenses 1,138, 000 $ 482, 000 Net operating income Required: What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)
Cardinal Company is considering a project that would require a $2,915,000 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 $300.000. The company's discount rate is 12%. The project would provide net operating income each year as follows: $2,746, 000 1,126, 000 1,620, 000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out -of-pocket $ 615, 000 523, 000 costs Depreciation Total fixed expenses 1,138, 000 $ 482, 000 Net operating income Required: What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...
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![Cardinal Company is considering a project that would require a $2.915.000 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 $300.000. The company's
discount rate is 12%. The project would provide net operating income each year as follows:
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out -ofF-pocket
Costs
$2,746,000
1,126,000
1,628, ర00
Depreciation
Total fixed expense5
$615,000
523, 000
1,138,000
Net operating income
$ 482,000
Required:
What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)
Simple rate of return
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Transcribed Image Text:Cardinal Company is considering a project that would require a $2.915.000 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 $300.000. The company's
discount rate is 12%. The project would provide net operating income each year as follows:
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out -ofF-pocket
Costs
$2,746,000
1,126,000
1,628, ర00
Depreciation
Total fixed expense5
$615,000
523, 000
1,138,000
Net operating income
$ 482,000
Required:
What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)
Simple rate of return
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