Question
Cardinal Company is considering a five-year project requiring a $2,812,000 investment in equipment with a useful life of five years and no salvage value.
Cardinal Company is considering a five-year project requiring a $2,812,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,855,000 1,010,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 798,000 Depreciation 562,400 Total fixed expenses 1,845,000 1,360,400 Net operating income $ 484,600 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 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? O Higher O Lower Same G
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