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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Mm.9.
Subject:- Account
![[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require 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
Fixed expenses:
Advertising, salaries, and other fixed
out-of-pocket costs
$ 798,000
562,400
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.
Answer is complete but not entirely correct.
Net present value
283,653 x
$ 2,855,000
1,010,000
1,845,000
$
Foundational 12-13 (Algo)
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 45%. What was the project's actual net present value? (Negative amount should be indicated by a
minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount.)
1,360,400
$ 484,600](https://content.bartleby.com/qna-images/question/5a79f5fd-2bdd-484b-9c0d-a83d48b55247/dc21f680-582a-4721-aff9-6f6f15ab15d8/l17goi_thumbnail.jpeg)
Transcribed Image Text:[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require 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
Fixed expenses:
Advertising, salaries, and other fixed
out-of-pocket costs
$ 798,000
562,400
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.
Answer is complete but not entirely correct.
Net present value
283,653 x
$ 2,855,000
1,010,000
1,845,000
$
Foundational 12-13 (Algo)
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 45%. What was the project's actual net present value? (Negative amount should be indicated by a
minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount.)
1,360,400
$ 484,600
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