Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales $ 2,735,000 1,000,000 1,735,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 Net operating income $ 405,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. What is the project's payback period? (Round your answer to 2 decimal places.)
Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales $ 2,735,000 1,000,000 1,735,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 Net operating income $ 405,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. What is the project's payback period? (Round your answer to 2 decimal places.)
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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![Required information
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating
income in each of five years as follows:
Sales
$ 2,735,000
1,000,000
1,735,000
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
Net operating income
$ 405,000
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
What is the project's payback period? (Round your answer to 2 decimal places.)
Project's payback period
years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2Ffe85750c-4d1c-4770-988a-17e58bcbe0f5%2Fmv4xkwm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating
income in each of five years as follows:
Sales
$ 2,735,000
1,000,000
1,735,000
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
Net operating income
$ 405,000
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
What is the project's payback period? (Round your answer to 2 decimal places.)
Project's payback period
years
![Required information
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating
income in each of five years as follows:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
6. What is the project's internal rate of return? (Round your answer to nearest whole percent.)
Project's internal rate of return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2Ffe85750c-4d1c-4770-988a-17e58bcbe0f5%2Frbmvtfe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a
useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating
income in each of five years as follows:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
6. What is the project's internal rate of return? (Round your answer to nearest whole percent.)
Project's internal rate of return
%
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