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Cardinal Company is considering a five-year project that would require a $2,975,000 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 $2,975,000 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 $ 2,735,000Variable expenses 1,000,000Contribution margin 1,735,000Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs$ 735,000 Depreciation595,000 Total fixed expenses 1,330,000Net operating income $ 405,000
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
6. What is the projects internal rate of return? (Round your answer to nearest whole percent.)
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