Cardinal Company is considering a project that would require a $2,755,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300,000. The companys discount rate is 14%. The project would provide net operating income each year as follows:

Sales			$	2,859,000
Variable expenses				1,100,000
Contribution margin				1,759,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	700,000
Depreciation		491,000
Total fixed expenses				1,191,000
Net operating income			$	568,000

What are the projects annual net cash inflows?

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

What is the present value of the equipments salvage value at the end of five years?

What is the projects net present value?

What is the project profitability index for this project?

What is the projects payback period? (years)

What is the projects simple rate of return for each of the five years? (%)

If the companys discount rate was 16% instead of 14%, would you expect the project's net present value to be higher than, lower than, or the same?

Lower

Higher

Same

If the equipments salvage value was $500,000 instead of $300,000, would you expect the projects payback period to be higher than, lower than, or the same?

Higher

Same

Lower

If the equipments salvage value was $500,000 instead of $300,000, would you expect the project's net present value to be higher than, lower than, or the same?

Higher

Same

Lower