Question
Cardinal Company is considering a five-year project that would require a $2,945,000 investment in equipment with a useful life of five years and no
Cardinal Company is considering a five-year project that would require a $2,945,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $2,873,000 1,019,000 Contribution margin 1,854,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 754,000 Depreciation 589,000 Total fixed expenses. 1,343,000 Net operating income $ 511,000 Click here to view Exhibit 148-1 and Exhibit 148-2, 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 Lower O Same
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