The following information applies to the questions displaye 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 ncome 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 bere to view Exhibit 14R-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using table.
The following information applies to the questions displaye 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 ncome 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 bere to view Exhibit 14R-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using table.
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
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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:
$ 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2F3238fd66-cd02-430f-ac5d-a5a8a60c35aa%2Fhppmx03_processed.jpeg&w=3840&q=75)
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 $2,975,000 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.
5. What is the profitability index for this project? (Round your answer to 2 decimal places.)
Profitability index](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2F3238fd66-cd02-430f-ac5d-a5a8a60c35aa%2Fxb0mav5_processed.jpeg&w=3840&q=75)
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 $2,975,000 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.
5. What is the profitability index for this project? (Round your answer to 2 decimal places.)
Profitability index
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