[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 $2,865,000Variable expenses 1,015,000Contribution margin 1,850,000Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs$750,000 Depreciation 591,000 Total fixed expenses 1,341,000Net 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?

Answered: Cardinal Company is considering a…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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[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?

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