Cardinal Company is considering a five-year project that would require a $2,812,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 16%. The project would provide net operating income in each of five years as follows:

Sales			$	2,855,000
Variable expenses				1,010,000
Contribution margin				1,845,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	798,000
Depreciation		562,400
Total fixed expenses				1,360,400
Net operating income			$	484,600

Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

	Sales
	Variable expenses
	Advertising, salaries, and other fixed out-of-pocket costs expenses
	Depreciation expense

Required information

3. What is the projects net present value? (Round discount factor(s) to 3 decimal places and final answer to the nearest whole dollar amount.)

5. What is the project profitability index for this project? (Round discount factor(s) to 3 decimal places and final answer to 2 decimal places.)

7. What is the projects payback period? (Round your answer to 2 decimal places.)

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 18% instead of 16%, would you expect the project's net present value to be higher, lower, or the same?

	Higher
	Lower
	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?

	Higher
	Lower
	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 and intermediate calculations to 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%.)