13.

Cardinal Company is considering a project that would require a $2,975,000 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 company?s discount rate is 14%. The project would provide net operating income each year as follows:

Sales			$	2,735,000
Variable expenses				1,000,000
Contribution margin				1,735,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	735,000
Depreciation		535,000
Total fixed expenses				1,270,000
Net operating income			$	465,000

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

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 net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, other intermediate calculations and final answer to the nearest whole dollar.)

Net present value

$