Question

Ursus, Inc., is considering a project that would have a five-year life and would require a $775,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 1,900,000 Variable expenses 1,300,000 Contribution margin 600,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 350,000 Depreciation 155,000 505,000 Net operating income $ 95,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 7%. Required: a. Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) b. Compute the project's internal rate of return. (Round your final answer to the nearest whole percent.) c. Compute the project's payback period. (Round your answer to 2 decimal places.) d. Compute the project's simple rate of return. (Round your final answer to the nearest whole percent.)..

Answer 1

Answer is given below