esRequired information[The following information applies to the questions displayed below.]Cardinal Company is considering a five-year project requiring a $2,945,000 investment in equipment with a useful life offive years and no salvage value. The company's discount rate is 18%. The project would provide net operating income ineach of five years as follows:SalesVariable expensesContribution marginAdvertising, salaries, and otherFixed expenses:fixed out-of-pocket costsDepreciationTotal fixed expenses$ 754,000589,000$ 2,873,0001,019,0001,854,0001,343,000Net operating income$ 511,000Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.12. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's simple rate of return tobe higher, lower, or the same?Simple rate of return would be

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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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Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. 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 Depreciation Total fixed expenses Net operating income $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 1,330,000 $ 405,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. O Higher O Lower O Same 10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be higher, lower, or the same?
Required information [The following information applies to the questions displayed below.] 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 591,000 $ 2,865,000 1,015,000 1,850,000 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. years 1,341,000 $ 509,000 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project requiring a $2,812,000 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 Advertising, salaries, and other Fixed expenses: fixed out-of-pocket costs Depreciation Total fixed expenses $ 2,855,000 1,010,000 1,845,000 $ 798,000 562,400 1,360,400 $ 484,600 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 2. What are the project's annual net cash inflows? Annual net cash inflow
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,810,000 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 fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $782,000 562,000 Simple rate of return $2,847,000 1,121,000 1,726,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. % 1,344,000 $ 382,000 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…
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,890,000 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 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 Net operating income %$4 $ 420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period уears
Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2,975.000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. 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 $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 78-1 and Exhibit ZB-2, to determine the appropriate discount factor(s) using table. 4 What is the project's net present value? Note: Round final answer to the nearest whole dollar amount. 1,330,000 $ 405,000
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2.810,000 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. fixed out-of-pocket costs $ 782,000 562,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table Answer is complete but not entirely correct. Present value $ 2,847,000 1,121,000 1,726,000 3433,000 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.) 1,344,000 $ 382,000
Required information [The following information applies to the questions displayed below.] A company is considering a five-year project that would require a $2,812,000 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: $ 2,855,000 1,010,000 1,845,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $ 798,000 562,400 1,360,400 Net operating income 484,600 2. What is the profitability index for this project? (Round your answer to 2 decimal places.) Profitability index
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: $ 2,735,000 1,000,000 1,735,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 $ 405,000 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 4. What is the project's net present value? (Round final answer to the nearest whole dollar amount.) Net present value
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: $ 2,735,000 1,000,000 1,735,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 $ 405,000 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 6. What is the project's internal rate of return? (Round your answer to nearest whole percent.) Project's internal rate of return %
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: $ 2,735,000 1,000,000 1,735,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 $ 405,000 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be higher, lower, or the same? O Higher O Lower O Same
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

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