[The following information applies to the questions displayed below.] Cardinal Company is considering a five-year projec
Posted: Tue Jul 05, 2022 11:48 am
[The following information applies to the questionsdisplayed below.]
Cardinal Company is considering a five-year project that wouldrequire a $2,810,000 investment in equipment with a useful life offive years and no salvage value. The company’s discount rate is16%. The project would provide net operating income in each of fiveyears as follows:
Click here to view Exhibit 7B-1 and Exhibit 7B-2,to determine the appropriate discount factor(s) using table.
rev: 05_11_2019_QC_CS-168512
11. If the equipment had a salvage value of $300,000 at theend of five years, would you expect the project's net presentvalue to be higher, lower, or the same?
multiple choice
Higher
Lower
Same
If the equipment had a salvage value of $300,000 at theend of five years, would you expect the project’s simple rate ofreturn to be higher, lower, or the same?multiple choice
Higher
Lower
Same
- Assume a post audit showed that all estimates (including totalsales) were exactly correct except for the variable expense ratio,which actually turned out to be 45%. What was the project’s actualnet present value? (Negative amount should beindicated by a minus sign. Round discount factor(s) to 3 decimalplaces, intermediate calculations and final answer to the nearestwhole dollar amount.)
Cardinal Company is considering a five-year project that wouldrequire a $2,810,000 investment in equipment with a useful life offive years and no salvage value. The company’s discount rate is16%. The project would provide net operating income in each of fiveyears as follows:
Click here to view Exhibit 7B-1 and Exhibit 7B-2,to determine the appropriate discount factor(s) using table.
rev: 05_11_2019_QC_CS-168512
11. If the equipment had a salvage value of $300,000 at theend of five years, would you expect the project's net presentvalue to be higher, lower, or the same?
multiple choice
Higher
Lower
Same
If the equipment had a salvage value of $300,000 at theend of five years, would you expect the project’s simple rate ofreturn to be higher, lower, or the same?multiple choice
Higher
Lower
Same
- Assume a post audit showed that all estimates (including totalsales) were exactly correct except for the variable expense ratio,which actually turned out to be 45%. What was the project’s actualnet present value? (Negative amount should beindicated by a minus sign. Round discount factor(s) to 3 decimalplaces, intermediate calculations and final answer to the nearestwhole dollar amount.)