Cardinal Company is considering a project that would require a $2,750,000 investment in equipment with a useful life of five years At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000 The companys discount rate is 18 The project would provide net operating income each year as follows Sales $ 2,849,000 Variable expenses 1,122,000 Contribution margin 1,727,000 Fixed expenses Advertising, salaries, and other fixed out of pocket costs $ 752,000 Depreciation 470,000 Total fixed expenses 1,222,000 Net operating income $ 505,000 Click here to view Exhibit 11B 1 and Exhibit 11B 2, to determine the appropriate discount factor(s) using tables http lectures mhhe com connect 0078025419 Exhibit Exhibit 2011B 1 JPG http lectures mhhe com connect 0078025419 Exhibit Exhibit 2011B 2 JPG 1 What is the project profitability index for this project (Use the appropriate table to determine the discount factor(s) and final answer to 2 decimal places ) 2 If the equipments salvage value was $600,000 instead of $400,000, what would be the projects simple rate of return (Round your answer to 2 decimal places (i e 0 1234 should be entered as 12 34 )) 3 Click here to view Exhibit 11B 1 and Exhibit 11B 2, to determine the appropriate discount factor(s) using tables 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 Use the appropriate table to determine the discount factor(s), other intermediate calculations and final answer to the nearest whole dollar )

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Question: Cardinal Company is considering a project that would require a $2,750,000 investment in equipment with a useful life of five years. At the end of

Cardinal Company is considering a project that would require a $2,750,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $400,000. The companys discount rate is 18%. The project would provide net operating income each year as follows:

Sales			$	2,849,000
Variable expenses				1,122,000

Contribution margin				1,727,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs	$	752,000
Depreciation		470,000

Total fixed expenses				1,222,000

Net operating income			$	505,000

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables

http://lectures.mhhe.com/connect/0078025419/Exhibit/Exhibit%2011B-1.JPG

http://lectures.mhhe.com/connect/0078025419/Exhibit/Exhibit%2011B-2.JPG

What is the project profitability index for this project? (Use the appropriate table to determine the discount factor(s) and final answer to 2 decimal places.)

2. If the equipments salvage value was $600,000 instead of $400,000, what would be the projects simple rate of return? (Round your answer to 2 decimal places. (i.e 0.1234 should be entered as 12.34.))

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

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. Use the appropriate table to determine the discount factor(s), other intermediate calculations and final answer to the nearest whole dollar.)