Cardinal Company is considering a five-year project that would require a $3,025,000 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				$	2,737,000
Variable expenses					1,001,000
Contribution margin					1,736,000
Fixed expenses:
Advertising, salaries, and other out-of-pocket costs	$	610,000
Depreciation		605,000
Total fixed expenses					1,215,000
Net operating income				$	521,000

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

7. 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%.)

8. 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?

multiple choice

Higher

Lower

Same

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

Higher

Lower

Same

10. 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? multiple choice

Higher

Lower

Same