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 years 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 $595,000$

Total fixed expenses $1,330,000$

Net operating income $ $405,000$

$1.$ Which item$($s$)$ in the income statement shown above will not affect cash flows?

Note: You may select more than one answer.

check all that apply

Sales unanswered

Variable expenses unanswered

Advertising, salaries, and other fixed out$-$of$-$pocket costs expenses unanswered

Depreciation expense

$2.$ What are the project$$s annual net cash inflows?

$3.$ What is the present value of the project$$s annual net cash inflows?

$4.$ What is the project$$s net present value?

$5.$ What is the profitability index for this project?

$6.$ What is the project$$s internal rate of return?

$7.$ What is the project$$s payback period?

$8.$ What is the project$$s simple rate of return for each of the five years?

$9.$ If the company$$s discount rate was $16\%$ instead of $14\%,$ would you expect the project's net present value to be higher, lower, or the same?

multiple choice

Higher

Lower

Same

$10.$ If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project$$s payback period to be higher, lower, or the same?

multiple choice

Higher

Lower

Same

$11.$If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project's net present value to be higher, lower, or the same?

multiple choice

Higher

Lower

Same

$12.$ If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project$$s simple rate of return to be higher, lower, or the same?

multiple choice

Lower

Higher

Same

$13.$ 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?

$14.$ 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 payback period?

$15.$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 simple rate of return?