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Required information Skip to question [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a
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[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $3,025,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 16%. The project would provide net operating income in each of five years as follows:
Sales | $ 2,737,000 | |
---|---|---|
Variable expenses | 1,001,000 | |
Contribution margin | 1,736,000 | |
Fixed expenses: | ||
Advertising, salaries, and other fixed out-of-pocket costs | $ 610,000 | |
Depreciation | 605,000 | |
Total fixed expenses | 1,215,000 | |
Net operating income | $ 521,000 |
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 simple rate of return? (Round your answer to 2 decimal places.)
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