Cardinal Company is considering a project that would require a $2,975,000 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

$

2,735,000

Variable expenses

1,000,000

Contribution margin

1,735,000

Fixed expenses:

Advertising, salaries, and other fixed out-of-pocket costs

$

735,000

Depreciation

535,000

Total fixed expenses

1,270,000

Net operating income

$

465,000

12.	If the equipments salvage value was $500,000 instead of $300,000, what would be the projects simple rate of return? (Round your answer to 2 decimal places. (i.e 0.1234 should be entered as 12.34.) )

13.

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 45%. What was the projects actual net present value? (Negative amount should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s), other intermediate calculations and final answer to the nearest whole dollar.)