Required information The Foundational 15 (Algo) (LO12-1, LO12-2, LO12-3, LO12-5, LO12-6) [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2,850,000 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 $ 799,000 570,000 Foundational 12-14 (Algo) $ 2,857,000 1,011,000 1,846,000 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. 1,369,000 $ 477,000 14. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
icon
Concept explainers
Topic Video
Question
15
7.11
es
Required information
The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6]
[The following information applies to the questions displayed below.)
Cardinal Company is considering a five-year project that would require a $2,850,000 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
$799,000
570,000
Depreciation
Total fixed expenses
1,369,000
Net operating income
$ 477,000
Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table.
Payback period
$ 2,857,000
1,011,000
1,846,000
Foundational 12-14 (Algo)
14. 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 payback period? (Round your answer to 2 decimal places.)
years
Transcribed Image Text:15 7.11 es Required information The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6] [The following information applies to the questions displayed below.) Cardinal Company is considering a five-year project that would require a $2,850,000 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 $799,000 570,000 Depreciation Total fixed expenses 1,369,000 Net operating income $ 477,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. Payback period $ 2,857,000 1,011,000 1,846,000 Foundational 12-14 (Algo) 14. 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 payback period? (Round your answer to 2 decimal places.) years
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education