Cardinal Company is considering a five-year project that would require a $2,755,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 14%. The project would provide net operating income in each of five years as follows:

Sales		$ 2,875,000
Variable expenses		1,124,000
Contribution margin		1,751,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$ 721,000
Depreciation	551,000
Total fixed expenses		1,272,000
Net operating income		$ 479,000

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.

13. 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 net present value?

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?

Present Value of an Annuity of $1 in Arrears;r1[1((1+r))n1] EXHIBIT 14B-1 Present Value of $1;((1+r))n1