Cardinal Company is considering a five-year project that would require a $2,975,000 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			$	2,735,000
Variable expenses				1,000,000
Contribution margin				1,735,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	735,000
Depreciation		595,000
Total fixed expenses				1,330,000
Net operating income			$	405,000

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table

1. What are the projects annual net cash inflows?

2. What is the project profitability index for this project? (Round your answer to 2 decimal places.)

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

4. What is the projects simple rate of return for each of the five years? (Round your answer to 2 decimal places.)

5. if the companys discount rate was 16% instead of 14%, would you expect the project's net present value to be higher, lower, or the same?

Higher

Lower

Same

6. 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?

Higher

Lower

Same

7. 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

8. 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?

Lower

Same

Higher