Question

Gaston Company is considering a capital budgeting project that would require a $2,900,000 investment in equipment with a useful life of five years and no salvage value. The company’s tax rate is 30% and its after-tax cost of capital is 13%. It uses the straight-line depreciation method for financial reporting and tax purposes. The project would provide net operating income each year for five years as follows: Sales $ 3,300,000 Variable expenses 1,570,000 Contribution margin 1,730,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 670,000 Depreciation 580,000 Total fixed expenses 1,250,000 Net operating income $ 480,000

Question:Net present vaule?

Answer #1

Net Income | 4,80,000 |

Tax | 1,44,000 |

Net Income after tax | 3,36,000 |

Depreciation | 5,80,000 |

Annual Cash Inflow | 9,16,000 |

PVIFA @13% for 5 years | 3.5172 |

PV of Annual Cash Inflows | 32,21,784 |

Initial Investment | 29,00,000 |

Net Present Value |
3,21,784 |

Gaston Company is considering a capital budgeting project that
would require a $2,300,000 investment in equipment with a useful
life of five years and no salvage value. The company’s tax rate is
30% and its after-tax cost of capital is 13%. It uses the
straight-line depreciation method for financial reporting and tax
purposes. The project would provide net operating income each year
for five years as follows:
Sales
$
3,100,000
Variable expenses
1,690,000
Contribution margin
1,410,000
Fixed expenses:
Advertising, salaries,...

Gaston Company is
considering a capital budgeting project that would require a
$2,700,000 investment in equipment with a useful life of five years
and no salvage value. The company’s tax rate is 30% and its
after-tax cost of capital is 13%. It uses the straight-line
depreciation method for financial reporting and tax purposes. The
project would provide net operating income each year for five years
as follows:
Sales
$
3,100,000
Variable
expenses
1,510,000
Contribution
margin
1,590,000
Fixed
expenses:
Advertising,
salaries,...

Cardinal Company is considering a five-year project that would
require a $3,025,000 investment in equipment with a useful life of
five years and no salvage value. The company's discount rate is
16%. The project would provide net operating income in each of five
years as follows:
Sales $2,737,000
Variable expenses $1,001,000
Contribution margin $1,736,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$610,000
Depreciation $605,000
Total fixed expenses $1,215,000
Net operating income $521,000
5. What is the project profitability...

Cardinal Company is considering a five-year project that would
require a $2,855,000 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:
Sales
$
2,867,000
Variable expenses
1,125,000
Contribution margin
1,742,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs
$
706,000
Depreciation
571,000
Total fixed expenses
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Net operating income
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Foundational 12-4
4....

Cardinal Company is considering a five-year project that would
require a $3,025,000 investment in equipment with a useful life of
five years and no salvage value. The company's discount rate is
16%. The project would provide net operating income in each of five
years as follows:
Sales $2,737,000
Variable expenses $1,001,000
Contribution margin $1,736,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$610,000
Depreciation $605,000
Total fixed expenses $1,215,000
Net operating income $521,000
4. What is the project's net...

Cardinal Company is considering a five-year project that would
require a $2,850,000 investment in equipment with a useful life of
five years and no salvage value. The company’s discount rate is
18%. The project would provide net operating income in each of five
years as follows:
Sales
$
2,857,000
Variable expenses
1,011,000
Contribution margin
1,846,000
Fixed expenses:
Advertising, salaries, and other
fixed out-of-pocket costs
$
799,000
Depreciation
570,000
Total fixed expenses
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Net operating income
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477,000
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Cardinal Company is considering a five-year project that would
require a $2,915,000 investment in equipment with a useful life of
five years and no salvage value. The company’s discount rate is
16%. The project would provide net operating income in each of five
years as follows:
Sales
$
2,863,000
Variable expenses
1,014,000
Contribution margin
1,849,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$
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Depreciation
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Cardinal Company is considering a five-year project that would
require a $2,500,000 investment in equipment with a useful life of
five years and no salvage value. The company’s discount rate is
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years as follows: Sales $ 2,853,000 Variable expenses 1,200,000
Contribution margin 1,653,000 Fixed expenses: Advertising,
salaries, and other fixed out-of-pocket costs $ 790,000
Depreciation 500,000 Total fixed expenses 1,290,000 Net operating
income $ 363,000 Click here to...

Cardinal Company is considering a project that would require a
$2,805,000 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 $400,000. The
company’s discount rate is 14%. The project would provide net
operating income each year as follows:
Sales
$
2,741,000
Variable
expenses
1,125,000
Contribution
margin
1,616,000
Fixed expenses:
Advertising,
salaries, and other
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Cardinal Company is considering a project that would require a
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Sales
$
2,861,000
Variable
expenses
1,101,000
Contribution
margin
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Advertising,
salaries, and other
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