Cardinal Company is considering a five-year project that would require a $2,755,000 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 $ 2,875,000 Variable expenses 1,124,000 Contribution margin 1,751,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 721,000 Depreciation 551,000 Total fixed expenses 1,272,000 Net operating income $ 479,000

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.

5. What is the profitability index for this project?

8. What is the projects simple rate of return for each of the five years?