Cardinal Company is considering a five-year project that would require a $2,755,000 investment in equipment with a
Question:
Cardinal Company is considering a five-year project that would require a $2,755,000 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 | $ | 2,875,000 | ||||||||||||||||||||||||
Variable expenses | 1,124,000 | |||||||||||||||||||||||||
Contribution margin | 1,751,000 | |||||||||||||||||||||||||
Fixed expenses: | ||||||||||||||||||||||||||
Advertising, salaries, and other fixed out-of-pocket costs | $ | 721,000 | ||||||||||||||||||||||||
Depreciation | 551,000 | |||||||||||||||||||||||||
Total fixed expenses | 1,272,000 | |||||||||||||||||||||||||
Net operating income | $ | 479,000 | ||||||||||||||||||||||||
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Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby