Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cardinal Company is considering a project that would require a $2,812,000 investment in equipment with a useful life of five years. At the end of

image text in transcribed
image text in transcribed
Cardinal Company is considering a project that would require a $2,812,000 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 $400,000. The company's discount rate is 18%. The project would provide net operating income each year as follows: Sales Variable expenses $ 2,855,000 1,010,000 1,845,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $ 798,000 482,400 Total foced expenses 1,280,400 Net operating income $ 564.600 Click here to view Exhibit 10B-1, to determine the appropriate discount factor(s) using table. Required: What is the present value of the equipment's salvage value at the end of five years? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.) Present value Cardinal Company is considering a project that would require a $2,725,000 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 $400,000. The company's discount rate is 14%. The project would provide net operating income each year as follows: Sales Variable expenses $ 2,867,000 1.125.000 1.742.000 Contribution margin Fbced expenses Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 700.000 465,000 1.171.000 S 571,000 Click here to view Exhibit 108-1 and Exhibit 10B-2, to determine the appropriate discount factor(s) using tables. Required: What is the project's net present value? (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) Net present value

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditor Going Concern Reporting A Review Of Global Research And Future Research Opportunities

Authors: Marshall A. Geiger, Anna Gold, Philip Wallage

1st Edition

0367649489, 978-0367649487

More Books

Students also viewed these Accounting questions