Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment...
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Accounting
Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 18%. The project would provide net operating income in each of five years as follows:
Sales
$
2,857,000
Variable expenses
1,011,000
Contribution margin
1,846,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$
799,000
Depreciation
570,000
Total fixed expenses
1,369,000
Net operating income
$
477,000
15. 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 simple rate of return? (Round your answer to 2 decimal places.)
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