Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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
$ 2,735,000
1,000,000
1,735,000
Depreciation
Total fixed expenses
Net operating income
Click here to view Exhibit 78-1 and Exhibit ZB-2, to determine the appropriate discount factor(s) using table.
4 What is the project's net present value?
Note: Round final answer to the nearest whole dollar amount.
1,330,000
$ 405,000
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Transcribed Image Text: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 $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 78-1 and Exhibit ZB-2, to determine the appropriate discount factor(s) using table. 4 What is the project's net present value? Note: Round final answer to the nearest whole dollar amount. 1,330,000 $ 405,000
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