Cardinal Company is considering a five-year project that would require a $2,765,000 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 opera income in each of five years as follows: Sales Variable expenses $ 2,851,000 1,150,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs $ 670,000 Depreciation 553,000 Total fixed expenses 1,701,000 Net operating income 1,223,000 $ 478,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.

Cardinal Company is considering a five-year project that would require a $2,765,000 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 opera income in each of five years as follows: Sales Variable expenses $ 2,851,000 1,150,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs $ 670,000 Depreciation 553,000 Total fixed expenses 1,701,000 Net operating income 1,223,000 $ 478,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.

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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Tempura, Inc., is considering two projects. Project A requires an investment of $50,000. Estimated annual receipts for 20 years are $20,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $75,000, has annual receipts for 20 years of $28,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 12%/year.a. What is the present worth of each project? b. Which project should be recommended?
Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
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The management of Penfold Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
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Hoffman company is considering a project that would have a five-year life and require a $3,200,000 investment in equipment. At the end of the five years, the project would terminate and the equipment would have no salvage value. The project would provide the following expected forecasts: Sales $ 5,000,000 Variable expenses $3,000,000 Fixed expenses (including depreciation) $1,600,000 The company’s tax rate is 20% and the WACC is 12% REQUIRED Compute the project’s NPV, IRR, payback period, discounted payback period, and profitability index
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a firm is considering a 3-year project with an initial cost of $636,000. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $279,000. The tax rate is 35 percent , and the required return is 17 percent . An extra $23,000 of inventory will be required for the life of the project. Annual sales are estimated at $379,000 with costs of 247,000. What is the total cash flow for Year 3? A)$319,208.19 B)$315,189.32 C)$406,208.19 D)$423,008.24 E)$281782.87