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 $420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 8. 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 %
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 $420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. 8. 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 %
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 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
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![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
$ 420,000
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
8. 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
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8c845cf8-3d77-4ddd-9d5a-2a560adfc5de%2F51b89793-8de5-4f2a-a9a9-6f157202050e%2Fu15o05h_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
$ 420,000
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
8. 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
%
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