Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,765,000 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: $2,851,000 1,150,000 1,701,000 Advertising, salaries, and other fixed out-of-pocket costs Depreciation $670,000 553,000 Total fixed expenses Net operating income 1,223,000 s 478,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period years

Explanation / Answer

7) Payback period = Initial investment/Annual cash flow

Annual cash flow = 553000+478000 = 1031000

Payback period = 2765000/1031000 = 2.68 years

8) Simple rate of return = 478000*100/2765000 = 17.29%

13) Net cash flow = (2851000*50%)-1223000+553000 = 755500

Net present value = (755500*3.433)-2765000 = -171369

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