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

Ursus, Inc., is considering a project that would have a
eleven-year life and would require a $1,848,000 investment in
equipment. At the end of eleven 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
$
2,100,000
Variable expenses
1,400,000
Contribution margin
700,000
Fixed expenses:
Fixed out-of-pocket cash
expenses
$
370,000
Depreciation
168,000
538,000
Net operating income
$
162,000
Click here to...

Ursus, Inc., is considering a project that would have a ten-year
life and would require a $3,300,000 investment in equipment. At the
end of ten 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
$
2,700,000
Variable expenses
1,700,000
Contribution margin
1,000,000
Fixed expenses:
Fixed out-of-pocket cash expenses
$
400,000
Depreciation
330,000
730,000
Net operating income
$
270,000
Click here to...

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
12%. The project would provide net operating income in each of five
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 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
1,369,000
Net operating income
$
477,000
Click here to...

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
$
781,000
Depreciation
583,000
Total fixed expenses
1,364,000
Net operating income
$
485,000
Click here to...

(Ignore income taxes in this problem.) Ursus Inc., is
considering a project that would have a ten-year life and would
require a $1,000,000 investment in equipment. At the end of ten
years, the project would terminate and the equipment would have no
salvage value. The project would provide net operating income each
year as follows:
Sales
$2,000,000
Variable Expenses
$1,400,000
Contribution Margin
$600,000
Fixed Expenses
$400,000
Net Operating Income
$200,000
All of these items, except for depreciation of $92,500 a...

Cardinal Company is considering a five-year project that would
require a $2,955,000 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
$
2,865,000
Variable expenses
1,015,000
Contribution margin
1,850,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$
750,000
Depreciation
591,000
Total fixed expenses
1,341,000
Net operating income
$
509,000
Required:
1. Which...

Cardinal Company is considering a five-year project that would
require a $2,812,000 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
$
2,855,000
Variable expenses
1,010,000
Contribution margin
1,845,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs
$
798,000
Depreciation
562,400
Total fixed expenses
1,360,400
Net operating income
$
484,600
Click here to...

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...

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