The Foundational $15($Algo$)[$LO$14-1,$ LO$14-2,$ LO$14-3,$ LO$14-5,$ LO$14-6]$

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Cardinal Company is considering a five$-$year project requiring a $$2,955,000$ investment in equipment with a useful life of five years and no salvage value. The company$$s discount rate is $16\%.$ The project would provide net operating income in each of five years as follows:

Sales $ $2,871,000$

Variable expenses $1,018,000$

Contribution margin $1,853,000$

Fixed expenses:

Advertising, salaries, and other fixed out$-$of$-$pocket costs$ $753,000$

Depreciation$591,000$

Total fixed expenses $1,344,000$

Net operating income $ $509,000$

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using table.

Required:

Which item$($s$)$ in the income statement shown above will not affect cash flows?

What are the project$$s annual net cash inflows?

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

What is the project$$s net present value?

What is the profitability index for this project?

What is the project$$s internal rate of return?

What is the project$$s payback period?

What is the project$$s simple rate of return for each of the five years?

If the company$$s discount rate was $18\%$ instead of $16\%,$ would you expect the project's net present value to be higher, lower, or the same?

If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project$$s payback period to be higher, lower, or the same?

If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project's net present value to be higher, lower, or the same?

If the equipment had a salvage value of $$300,000$ at the end of five years, would you expect the project's net present value to be higher, lower, or the same?

Assume a postaudit showed all estimates $($including total sales$)$ were exactly correct except for the variable expense ratio, which actually turned out to be $45\%.$ What was the project$$s actual net present value?

Assume a postaudit showed all estimates $($including total sales$)$ were exactly correct except for the variable expense ratio, which actually turned out to be $45\%.$ What was the project$$s actual payback period?

Assume a postaudit showed all estimates $($including total sales$)$ were exactly correct except for the variable expense ratio, which actually turned out to be $45\%.$ What was the project$$s actual simple rate of return?