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 out-of-pocket costs	$	750,000
Depreciation		591,000
Total fixed expenses					1,341,000
Net operating income				$	509,000

(Hint: Use Microsoft Excel to calculate the discount factor(s).)

9. 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?

multiple choice

1. Higher
2. Lower
3. Same

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

multiple choice

1. Higher
2. Lower
3. Same