Kohl Industries is considering a new project that would require an investment of $2,975,000 in equipment with a useful life of five years. At the end of the 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		$2,635,000
Variable expenses		1,100 000
Contribution margin		1,535,000
Fixed expenses:
Advertising, salaries, and other fixed costs:	$635,000
Depreciation	435,000
Total fixed expenses		1,070,000
Net operating income		$ 465,000

What is the projects present value?

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

What is the projects payback period?

What is the projects internal rate of return?

If the companys discount rate was 16% instead of 14%, what would the impact be on the following:

1. 1. 1. 1. Projects net present value?
         2. Projects payback period?
         3. Projects internal rate of return?

If the equipments salvage value was $500,000 instead of $300,000, what would the impact be on the following:

1. 1. 1. 1. Projects net present value?
         2. Projects payback period?
         3. Projects internal rate of return?

Assume a post audit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What would the impact be on the following:

1. 1. 1. 1. Projects net present value?
         2. Projects payback period?
         3. Projects internal rate of return?

Based the above, would you recommend the company accept this project? Support your recommendation in a minimum of two complete paragraphs consisting of a minimum of 6 sentences in each paragraph. You should use the knowledge you have gained in this course to support your recommendation. Remember you must cite all sources used in APA style.