Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 15F15
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 wars as follows: 
Required:
(Answer each question by referring to the original data unless instructed otherwise.)
15. 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 projects actual simple
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Mountain Frost is considering a new project with an initial cost of $295,000. The equipment will
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What is the average accounting return?
Multiple Choice
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(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Chapter 12 Solutions
Introduction To Managerial Accounting
Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3ECh. 12.A - Prob. 4ECh. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6ECh. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - Prob. 4Q
Ch. 12 - Why are discounted cash flow methods of making...Ch. 12 - Prob. 6QCh. 12 - Identify two simplifying assumptions associated...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10QCh. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - How is the project profitability index computed,...Ch. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1AECh. 12 - The Excel worksheet form that appears below is to...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 3F15Ch. 12 - Prob. 4F15Ch. 12 - Prob. 5F15Ch. 12 - Prob. 6F15Ch. 12 - Prob. 7F15Ch. 12 - Prob. 8F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 11F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 13F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Payback Method The management of Unter...Ch. 12 - Net Present Value Analysis The management of...Ch. 12 - Internal Rate of Return Wendell’s Donut Shoppe is...Ch. 12 - Uncertain Future Cash Flows Lukow Products is...Ch. 12 - Prob. 5ECh. 12 - Simple Rate of Return Method The management of...Ch. 12 - Prob. 7ECh. 12 - Payback Period and Simple Rate of Return Nicks...Ch. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Preference Ranking of Investment Projects Oxford...Ch. 12 - Prob. 12ECh. 12 - Payback Period and Simple Rate of Return...Ch. 12 - Comparison of Projects Using Net Present Value...Ch. 12 - Internal Rate of Return and Net Present Value...Ch. 12 - Net Present Value Analysis Windhoek Mines, Ltd.,...Ch. 12 - Net Present Value Analysis; Internal Rate of...Ch. 12 - Net Present Value Analysis Oakmont Company has an...Ch. 12 - Simple Rate of Return; Payback Period Paul Swanson...Ch. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Comprehensive Problem - Lou Barlow, a divisional...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Net Present Value Analysis In five years, Kent...Ch. 12 - Prob. 28PCh. 12 - Prob. 29P
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- A company is considering purchasing an equipment for $136,840. Shipping and installation costs would cost another $6,599. The project would require an initial investment in net working capital of $21,243 which would be recouped at the end of the project. What is the project's initial outlay? Do not enter $ or comma in the answer answer. Enter your final answer of initial outlay as an absolute number (that means, enter it as a positive number).arrow_forward[The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. 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 Depreciation Total fixed expenses $2,739,000 1, 100,000 1,639,000 $641,000 578,000 1,219,000 Net operating income $4 420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 2. What are the project's annual net cash inflows? Annual net cash inflowarrow_forward[The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales $ 2,865,000 Variable expenses 1,015,000 Contribution margin 1,850,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 Depreciation 591,000 Total fixed expenses 1,341,000 Net operating income $ 509,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. rev: 05_11_2019_QC_CS-168512 5. What is the project profitability index for this project?arrow_forward
- [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales $ 2,865,000 Variable expenses 1,015,000 Contribution margin 1,850,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 750,000 Depreciation 591,000 Total fixed expenses 1,341,000 Net operating income $ 509,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. rev: 05_11_2019_QC_CS-168512 7. What is the project’s payback period?arrow_forwardCardinal Company is considering a five-year project that would require a $2,915,000 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 Depreciation Total fixed expenses $ 2,863, 000 1,014,000 1,849,000 $ 781,000 583, 000 1,364, 000 $ 485,000 Net operating incone Click here to view Exhibit 148-1 ond Exhibit 148-2, to determine the appropriate discount factor(s) using table. 15. 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 simple rate of return? (Round your answer to 2 decimal places.) Simple rate of returnarrow_forwardMountain Frost is considering a new project with an initial cost of $180,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $19,500, $20,400, $24,600, and $16,400, respectively. What is the average accounting return?arrow_forward
- [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. 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- $ 641,000 578,000 of-pocket costs Depreciation $ 2,739,000 1,100,000 1,639,000 D Total fixed expenses 1,219,000 Net operating income $ 420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-2 (Algo) 2. What are the project's annual net cash inflows?arrow_forwardConsider a four-year project with the following information: Initial fixed asset investment = $560,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $28; variable costs = $20; fixed costs = $200,000; quantity sold = 86,000 units; tax rate = 35 percent. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places,arrow_forward[The following information applies to the questions displayed below.] Project Y requires a $306,000 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 390,000 174,720 61,200 28,000 $ 126,080 2. Determine Project Y's payback period. Project Y Payback Period Numerator: 1 Denominator: = = Payback Period 0arrow_forward
- A project has an initial cost of $34051 and a three-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected net income from the project is $1,700, $2,000, and $2330 a year for the next three years, respectively. What is the average accounting return?arrow_forwardCardinal 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 Depreciation Total fixed expenses Net operating income $ 735,000 595,000 $ 2,735,000 1,000,000 1,735,000 Net present value 1,330,000 $ 405,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 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…arrow_forwardThe Molding Department of General Santos, Inc. doing an investigation for the possibility of acquiring a new unit of equipment at the amount of $120,000. Cash cost savings before income tax from the use of this equipment has been estimated at $50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate. Requirements: Calculate the NPV under straight-line depreciation Calculate the NPV under SYD depreciation. Explain how bookkeeping method can help to improve the rating of a capital investment project.arrow_forward
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