Cardinal Company is considering a five-year project that would require a $2,955,000 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

$

2,865,000

Variable expenses

1,015,000

Contribution margin

1,850,000

Fixed expenses:

Advertising, salaries, and other fixed out-of-pocket costs

$

750,000

Depreciation

591,000

Total fixed expenses

1,341,000

Net operating income

$

509,000

5.

What is the project profitability index for this project?

7.

What is the projects payback period?

8.

What is the projects simple rate of return for each of the five years? (Round your answer to 2 decimal places. i.e. 0.12342 should be considered as 12.34%.)

9.

If the companys discount rate was 20% instead of 18%, would you expect the project's net present value to be higher, lower, or the same?

10.

If the equipment had a salvage value of $300,000 at the end of five years, would you expect the projects payback period to be higher, lower, or the same?

11.

If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's net present value to be higher, lower, or the same?

12.

If the equipment had a salvage value of $300,000 at the end of five years, would you expect the projects simple rate of return to be higher, lower, or the same?

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 45%. What was the projects actual net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount.)

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 45%. What was the projects actual payback period? (Round your answer to 2 decimal places.)

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. i.e. 0.12342 should be considered as 12.34%.)