Cardinal Company is considering a project that would require an investment of $2,725,000 in equipment with a useful life of five years. After five years, the project would be complete and the equipment would be sold for its salvage value of $400,000. The company's discount rate is 14%. The project would provide net operating income each year as follows:

Sales			ps	2,867,000
Variable expends				1,125,000
Contribution margin				1,742,000
Fixed costs:
Advertising, salaries and other fixed out-of-pocket expenses	ps	706,000
Depreciation		465.000
Total fixed expenses				1,171,000
operating margin			ps	571,000

 Questions

What are the annual net cash inflows of the project?

What is the present value of the project's net annual cash inflows?

What is the present value of the salvage value of the equipment at the end of five years?

What is the net present value of the project?

Answer rating: 100% (QA)

To calculate the annual net cash inflows we need to subtract the total expenses fixed and variable f... View the full answer