Kenny Ltd$.$ Is considering a project that would require a $$3,200,000$ investment in equipment with a useful life of five years. At the end of five years, the project would terminate, and the equipment would be sold for its salvage value of $$300,000.$ The companys discount rate is $10\%.$ The project would provide net operating income each year as follows:

Sales $$2,735,000$

Variable expense $1,000,000$

Contribution margin $1,735,000$

Fixed expenses:

Advertising, salaries, and other fixed out$-$of$-$pocket costs $$735,000$

Depreciation $535,000$

Total fixed expenses $1,270,000$

Net operation income $$465,000$

Answer the following questions:

$1.$ Which item$($s$)$ in the income statement shown above will not affect cash flows?

$2.$ What is the projects annual net cash inflows?

$3.$ What is the present value of the projects annual net cash inflows?

$4.$ What is the present value of the equipments salvage value at the end of five years?

$5.$ What is the projects net present value?

Answer rating: 100% (QA)

1 Items not affecting cash flows Depreciation is a noncash expense Its an accounting concept that al... View the full answer