[The following information applies to the questions displayed below.] Cardinal Company is considering a five-year...
70.2K
Verified Solution
Link Copied!
Question
Accounting
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,890,000 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
$
2,739,000
Variable expenses
1,100,000
Contribution margin
1,639,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$
641,000
Depreciation
578,000
Total fixed expenses
1,219,000
Net operating income
$
420,000
5. What is the project profitability index for this project?
14. 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 payback period?
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 50%. What was the projects actual simple rate of return?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
