project's payback period
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 11P: REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old...
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![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:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be
higher, lower, or the same?
O Higher
O Lower
O Same](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2F55201abf-8040-4aba-9b79-cd3893819fd0%2Fpzutmf8_processed.jpeg&w=3840&q=75)
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:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
10. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's payback period to be
higher, lower, or the same?
O Higher
O Lower
O Same
![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:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
11. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's net present value to be
higher, lower, or the same?
O Higher
O Lower
O Same](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2F55201abf-8040-4aba-9b79-cd3893819fd0%2F0nbgvyj_processed.jpeg&w=3840&q=75)
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:
$ 2,735,000
1,000,000
1,735,000
Sales
Variable expenses
Contribution margin
Fixed expenses:
Advertising, salaries, and other fixed out-
of-pocket costs
Depreciation
Total fixed expenses
$ 735,000
595,000
1,330,000
$ 405,000
Net operating income
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
11. If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project's net present value to be
higher, lower, or the same?
O Higher
O Lower
O Same
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