Cardinal Company is considering a five-year project that would require a $2,805,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 14%. The project would provide net operating income in each of five years as follows:

Sales			$	2,741,000
Variable expenses				1,125,000
Contribution margin				1,616,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	642,000
Depreciation		561,000
Total fixed expenses				1,203,000
Net operating income			$	413,000

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

	Sales
	Variable expenses
	Advertising, salaries, and other fixed out-of-pocket costs expenses
	Depreciation expense

3. What is the projects net present value?

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