Question
1. Cardinal Company is considering a project that would require a $2,805,000 investment in equipment with a useful life of five years. At the end
1. Cardinal Company is considering a project that would require a $2,805,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000. The companys discount rate is 14%. The project would provide net operating income each year as follows:
Sales $ 2,741,000
Variable expenses 1,125,000
Contribution margin 1,616,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 642,000
Depreciation 481,000
Total fixed expenses 1,123,000
Net operating income $ 493,000
Required:
What are the projects annual net cash inflows?
Annual net cash inflow $
2. Cardinal Company is considering a project that would require a $2,725,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000. The companys discount rate is 14%. The project would provide net operating income each year as follows:
Sales $ 2,867,000
Variable expenses 1,125,000
Contribution margin 1,742,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 706,000
Depreciation 465,000
Total fixed expenses 1,171,000
Net operating income $ 571,000
Click here to view Exhibit 11B-2, to determine the appropriate discount factor(s) using table.
Required:
What is the present value of the projects annual net cash inflows? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
Present value $
3. Cardinal Company is considering a project that would require a $2,745,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $500,000. The companys discount rate is 18%. The project would provide net operating income each year as follows:
Sales $ 2,857,000
Variable expenses 1,011,000
Contribution margin 1,846,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 799,000
Depreciation 449,000
Total fixed expenses 1,248,000
Net operating income $ 598,000
Click here to view Exhibit 11B-1, to determine the appropriate discount factor(s) using table.
Required:
What is the present value of the equipments salvage value at the end of five years? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
Present value $
4. Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $200,000. The companys discount rate is 12%. The project would provide net operating income each year as follows:
Sales $ 2,861,000
Variable expenses 1,101,000
Contribution margin 1,760,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 705,000
Depreciation 513,000
Total fixed expenses 1,218,000
Net operating income $ 542,000
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.
Required:
What is the projects net present value? (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
Net present value $
5. Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300,000. The companys discount rate is 14%. The project would provide net operating income each year as follows:
Sales $ 2,851,000
Variable expenses 1,150,000
Contribution margin 1,701,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 670,000
Depreciation 493,000
Total fixed expenses 1,163,000
Net operating income $ 538,000
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.
Required:
What is the project profitability index for this project? (Round discount factor(s) to 3 decimal places and final answer to 2 decimal places.)
Project profitability index
6. Cardinal Company is considering a project that would require a $2,815,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $500,000. The companys discount rate is 18%. The project would provide net operating income each year as follows:
Sales $ 2,865,000
Variable expenses 1,015,000
Contribution margin 1,850,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs $ 750,000
Depreciation 463,000
Total fixed expenses 1,213,000
Net operating income $ 637,000
Required:
What is the projects payback period? (Round your answer to 2 decimal places.)
Projects payback period years
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