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Cardinal Company is considering a five-year project that would require a $2,870,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,861,000 1,101,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 705,000 Depreciation 574,000 Total fixed expenses 1,760,000 Net operating income 1,279,000 $ 481,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 13. 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 50%. What was the project's actual net present value? Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount. Net present value

Cardinal Company is considering a five-year project that would require a $2,870,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,861,000 1,101,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 705,000 Depreciation 574,000 Total fixed expenses 1,760,000 Net operating income 1,279,000 $ 481,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 13. 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 50%. What was the project's actual net present value? Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount. Net present value

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cardinal Company is considering a five-year project that would require a $2,870,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,861,000 1,101,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 705,000 Depreciation 574,000 Total fixed expenses 1,760,000 Net operating income 1,279,000 $ 481,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 13. 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 50%. What was the project's actual net present value? Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount. Net present value
Transcribed Image Text:Cardinal Company is considering a five-year project that would require a $2,870,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,861,000 1,101,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 705,000 Depreciation 574,000 Total fixed expenses 1,760,000 Net operating income 1,279,000 $ 481,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. 13. 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 50%. What was the project's actual net present value? Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount. Net present value
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