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Cardinal Company is considering a five - year project that would require a $ 2 , 9 7 5 , 0 0 0 investment in
Cardinal Company is considering a fiveyear project that would require a $ investment in equipment with a useful life of five years and no salvage value. The companys discount rate is The project would provide net operating income in each of five years as follows: Sales $ Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed outofpocket costs $ Depreciation Total fixed expenses Net operating income $ My question is: Why The payback period would be the same because the initial investment was recovered at the end of three years. The salvage value at the end of five years is irrelevant to the payback calculation.
Cardinal Company is considering a fiveyear project that would require a $ investment in equipment with a useful life of five years and no salvage value. The companys discount rate is The project would provide net operating income in each of five years as follows:
Sales $
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed outofpocket costs $
Depreciation
Total fixed expenses
Net operating income $ My question is: Why The payback period would be the same because the initial investment was recovered at the end of three years. The salvage value at the end of five years is irrelevant to the payback calculation.
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