Question
Required information The Foundational 15 [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6] Skip to question [The following information applies to the questions displayed below.] Cardinal Company is
Required information
The Foundational 15 [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6]
Skip to question
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,500,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 12%. The project would provide net operating income in each of five years as follows:
Sales | $ | 2,853,000 | ||
Variable expenses | 1,200,000 | |||
Contribution margin | 1,653,000 | |||
Fixed expenses: | ||||
Advertising, salaries, and other fixed out-of-pocket costs | $ | 790,000 | ||
Depreciation | 500,000 | |||
Total fixed expenses | 1,290,000 | |||
Net operating income | $ | 363,000 | ||
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
rev: 05_11_2019_QC_CS-168512
Foundational 12-2
2. What are the projects annual net cash inflows?
3. What is the present value of the projects annual net cash inflows? (Round your final answer to the nearest whole dollar amount.)
4. What is the projects net present value? (Round discount factor(s) to 3 decimal places and final answer to the nearest whole dollar amount.)
5. What is the project profitability index for this project? (Round your answer to 2 decimal places.)
6. What is the projects internal rate of return? (Round your answer to nearest whole percent.)
7. What is the projects payback period? (Round your answer to 2 decimal places.)
8. What is the projects simple rate of return for each of the five years? (Round your answer to 2 decimal places.)
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