Question
Cardinal Company is considering a five-year project that would require a $2,955,000 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 $2,955,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 16%. The project would provide net operating income in each of five years as follows: |
Sales | $ | 2,871,000 | |||
Variable expenses | 1,018,000 | ||||
Contribution margin | 1,853,000 | ||||
Fixed expenses: | |||||
Advertising, salaries, and other fixed out-of-pocket costs | $ | 753,000 | |||
Depreciation | 591,000 | ||||
Total fixed expenses | 1,344,000 | ||||
Net operating income | $ | 509,000 | |||
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