Cardinal Company is considering a five-year project that would require a $2,855,000 investment in equipment with a
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Cardinal Company is considering a five-year project that would require a $2,855,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 14%. The project would provide net operating income in each of five years as follows:
Sales | $ | 2,867,000 | ||
Variable expenses | 1,125,000 | |||
Contribution margin | 1,742,000 | |||
Fixed expenses: | ||||
Advertising, salaries, and other fixed out-of-pocket costs | $ | 706,000 | ||
Depreciation | 571,000 | |||
Total fixed expenses | 1,277,000 | |||
Net operating income | $ | 465,000 | ||
5. What is the project profitability index for this project? (Round your answer to 2 decimal places.)
Related Book For
Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby
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