Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2.975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 735,000 $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 28.1 and Exhibit ZB-2. to determine the appropriate discount factor(s) using table. What is the project's net present value? ote: Round final answer to the nearest whole dollar amount. 1,330,000 $ 405,000

Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2.975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 735,000 $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 28.1 and Exhibit ZB-2. to determine the appropriate discount factor(s) using table. What is the project's net present value? ote: Round final answer to the nearest whole dollar amount. 1,330,000 $ 405,000

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Description: Required information[The following information applies to the questions displayed below]Cardinal Company is considering a five-year project that would require a $2,975.000 investment in equipment with auseful life of five years and no salvage value.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4PA: Net present value method, internal rate of return method, and analysis for a service company The...

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Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. Determine the internal rate of return for each project by (A) computing a present value factor for an annuity of 1 and (B) using the present value of an annuity of 1 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating. income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 591,000 $ 2,865,000 1,015,000 1,850,000 Depreciation. Total fixed expenses Net operating income Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s) using table. years 1,341,000 $ 509,000 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses Net operating income $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 1,330,000 $ 405,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. O Higher O Lower O Same 10. 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?
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,810,000 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $782,000 562,000 Simple rate of return $2,847,000 1,121,000 1,726,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. % 1,344,000 $ 382,000 15. 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 project's actual simple rate of return? (Round your answer to 2…
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project requiring a $2,812,000 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 Variable expenses Contribution margin Advertising, salaries, and other Fixed expenses: fixed out-of-pocket costs Depreciation Total fixed expenses $ 2,855,000 1,010,000 1,845,000 $ 798,000 562,400 1,360,400 $ 484,600 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 2. What are the project's annual net cash inflows? Annual net cash inflow
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2.810,000 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other. fixed out-of-pocket costs $ 782,000 562,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table Answer is complete but not entirely correct. Present value $ 2,847,000 1,121,000 1,726,000 3433,000 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.) 1,344,000 $ 382,000
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,810,000 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other out-of-pocket costs Depreciation Total fixed expenses Net operating income $782,000 562,000 $2,847,000 1,121,000 1,726,000 Net present value 1,344,000 $382,000 (Hint: Use Microsoft Excel to calculate the discount factor(s).) 12. 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 was the project's actual net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal…
Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 735,000 595,000 2. What are the project's annual net cash inflows? $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 7B-1 and Exhibit 7B-2. to determine the appropriate discount factor(s) using table. 1,330,000 $ 405,000
Cardinal Company is considering a five-year project that would require a $3,025,000 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 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other out- of-pocket costs Depreciation Total fixed expenses Net operating income $610,000 605,000 Simple rate of return (Hint: Use Microsoft Excel to calculate the discount factor(s).) % $2,737,000 1,001,000 1,736,000 7. What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places. i.e. 0.12342 should be considered as 12.34%.) 1,215,000 $ 521,000
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: $ 2,735,000 1,000,000 1,735,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 $ 405,000 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 4. What is the project's net present value? (Round final answer to the nearest whole dollar amount.) Net present value
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales $ 2,735,000 1,000,000 1,735,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 Net operating income $ 405,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 2. What are the project's annual net cash inflows? Annual net cash inflow
Required information [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: $ 2,735,000 1,000,000 1,735,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses $ 735,000 595,000 1,330,000 $ 405,000 Net operating income Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 6. What is the project's internal rate of return? (Round your answer to nearest whole percent.) Project's internal rate of return %