Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 18%. The project would provide net operating income in each of five years as follows:

Sales		$ 2,857,000
Variable expenses		1,011,000
Contribution margin		1,846,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$ 799,000
Depreciation	570,000
Total fixed expenses		1,369,000
Net operating income		$ 477,000

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

2. What are the projects annual net cash inflows?

3. What is the present value of the projects annual net cash inflows?

4. What is the projects net present value?

6. What is the projects internal rate of return?

7. What is the projects payback period?

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

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 45%. What was the projects actual net present value?

14. 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 45%. What was the projects actual payback period

15. 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 45%. What was the projects actual simple rate of return