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Cardinal Company is considering a five-year project that would require a $2,915,000 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 $2,915,000 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 $ 2,863,000
Variable expenses 1,014,000
Contribution margin 1,849,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $ 781,000
Depreciation 583,000
Total fixed expenses 1,364,000
Net operating income $ 485,000

Required:

1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

  • Sales
  • Variable expenses
  • Advertising, salaries, and other fixed out-of-pocket costs expenses
  • Depreciation expense

5. What is the project profitability index for this project? (Round your answer to 2 decimal places.)

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