Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage

Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales $ 2,739,000 Variable expenses 1,100,000 Contribution margin 1,639,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 641,000 Depreciation 578,000 Total fixed expenses 1,219,000 Net operating income $ 420,000

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 50%. What was the projects actual net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Pauline Weetman

6th Edition

0273789252, 978-0273789253

More Books

Students also viewed these Accounting questions

Question

all SQL databases are relational databases

Answered: 1 week ago

Question

=+4. What do you think?

Answered: 1 week ago