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 $2,847,000 1,121,000 1,726,000 1,344,000 $382,000 Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s) using table. 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.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $2,810,000 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 decimal places.)
Transcribed Image Text: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 decimal places.)
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