Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Related questions
Question
A2
![**Required Information**
**The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6]**
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,800,000 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:** $2,845,000
- **Variable expenses:** $1,109,000
- **Contribution margin:** $1,736,000
**Fixed expenses:**
- Advertising, salaries, and other fixed out-of-pocket costs: $799,000
- Depreciation: $560,000
**Total fixed expenses:** $1,359,000
**Net operating income:** $377,000
Click here to view [Exhibit 12B-1](#) and [Exhibit 12B-2](#), to determine the appropriate discount factor(s) using table.
---
**Foundational 12-14 (Algo)**
14. 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 payback period? (*Round your answer to 2 decimal places.*)
- **Payback period:** [Input Box] years](https://content.bartleby.com/qna-images/question/f96beba6-2919-4d0e-b7ed-499fbd5790bd/669448ff-b9b8-4acf-bb46-50de9c3d7b2d/zuv206_processed.png)
Transcribed Image Text:**Required Information**
**The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6]**
[The following information applies to the questions displayed below.]
Cardinal Company is considering a five-year project that would require a $2,800,000 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:** $2,845,000
- **Variable expenses:** $1,109,000
- **Contribution margin:** $1,736,000
**Fixed expenses:**
- Advertising, salaries, and other fixed out-of-pocket costs: $799,000
- Depreciation: $560,000
**Total fixed expenses:** $1,359,000
**Net operating income:** $377,000
Click here to view [Exhibit 12B-1](#) and [Exhibit 12B-2](#), to determine the appropriate discount factor(s) using table.
---
**Foundational 12-14 (Algo)**
14. 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 payback period? (*Round your answer to 2 decimal places.*)
- **Payback period:** [Input Box] years
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps with 1 images
Knowledge Booster
Similar questions
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education