Chapter 12, Problem 12F15

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 wars as follows:

Required:
(Answer each question by referring to the original data unless instructed otherwise.)
12. If the equipment bad a salvage value of $300,000 at the end of five years, would expect the project’s simple rate of return to be higher than, lower than, or the same as vow answer to requirement 8? No computations are necessary.