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

1. If the equipments salvage value was $500,000 instead of $300,000, what would be the projects simple rate of return?

2. 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 50%. What was the projects actual net present value?