Cardinal Company is considering a project that would require a $2.915.000 investment in equipment with a useful life of five years. Atthe end of five years, the project would terminate and the equipment would be sold for its salvage value of $300.000. The company'sdiscount rate is 12%. The project would provide net operating income each year as follows:SalesVariable expensesContribution marginFixed expenses:Advertising, salaries, and other fixed out -ofF-pocketCosts$2,746,0001,126,0001,628, ర00DepreciationTotal fixed expense5$615,000523, 0001,138,000Net operating income$ 482,000Required:What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)Simple rate of return< Prev14 of 20Next >

Given: Initial investment = $2,915,000 Net operating income = $482,000

Cardinal Company is considering a project that would require a $2,915,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300.000. The company's discount rate is 12%. The project would provide net operating income each year as follows: $2,746, 000 1,126, 000 1,620, 000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out -of-pocket $ 615, 000 523, 000 costs Depreciation Total fixed expenses 1,138, 000 $ 482, 000 Net operating income Required: What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)

Cardinal Company is considering a project that would require a $2,915,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300.000. The company's discount rate is 12%. The project would provide net operating income each year as follows: $2,746, 000 1,126, 000 1,620, 000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out -of-pocket $ 615, 000 523, 000 costs Depreciation Total fixed expenses 1,138, 000 $ 482, 000 Net operating income Required: What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...

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