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Please explain each step. Thank you! Foundational [LO11-1, LO11-2, L011-3, LO11-4] Cardinal Company is considering a project that would require a $2,750,000 investment in equipment
Please explain each step. Thank you!
Foundational [LO11-1, LO11-2, L011-3, LO11-4] Cardinal Company is considering a project that would require a $2,750,000 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: $2,849,000 1,122,000 Sales Variable expenses 1,727,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $752,000 470,000 Total fixed expenses 1,222,000 Net operating income $ 505,000
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