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 Depreciation Total fixed expenses $ 2,857,000 1,011,000 1,846,000 $ 799,000 570,000 1,369,000 $ 477,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 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.) Payback period years A

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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Manji 

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
Depreciation
Total fixed expenses
$ 2,857,000
1,011,000
1,846,000
$ 799,000
570,000
1,369,000
$ 477,000
Net operating income
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the
appropriate discount factor(s) using table.
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.)
Payback period
years
A
Transcribed Image Text: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 Depreciation Total fixed expenses $ 2,857,000 1,011,000 1,846,000 $ 799,000 570,000 1,369,000 $ 477,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 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.) Payback period years A
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