FINANCIAL ACCOUNTING
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
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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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