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3. Ursus, Incorporated, is considering a project that would have a eight-year life and would require a $2,640,000 investment in equipment. At the end of
3. Ursus, Incorporated, is considering a project that would have a eight-year life and would require a $2,640,000 investment in equipment. At the end of eight years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 2,700,000 Variable expenses 1,700,000 Contribution margin 1,000,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 400,000 Depreciation 330,000 730,000 Net operating income $ 270,000 All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 11%
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