Cardinal Company is considering a project that would require a $2,800,000 investment in equipment with a useful
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Question:
Cardinal Company is considering a project that would require a $2,800,000 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 $300,000. The companys discount rate is 14%. The project would provide net operating income each year as follows:
Sales $ 2,845,000
Variable expenses 1,109,000
Contribution margin 1,736,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $ 799,000
Depreciation 500,000
Total fixed expenses 1,299,000
Net operating income $ 437,000
Required:
If the equipments salvage value was $500,000 instead of $300,000, what would be the projects simple rate of return? (Round your answer to 2 decimal places.
Simple rate of return ????
Related Book For
Introduction to Managerial Accounting
ISBN: 978-0078025792
7th edition
Authors: Peter Brewer, Ray Garrison, Eric Noreen
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