Cardinal Company is considering a fiveyear project that would require a $2,845,000 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  $  2,869,000  
Variable expenses  1,126,000  
Contribution margin  1,743,000  
Fixed expenses:  
Advertising, salaries, and other fixed outofpocket costs 
$  709,000  
Depreciation  569,000  
Total fixed expenses  1,278,000  
Net operating income  $  465,000  
Click here to view Exhibit 13B1 and Exhibit 13B2, to determine the appropriate discount factor(s) using tables. 
References
Section BreakFoundational [LO131, LO132, LO133, LO135, LO136]
1.
value:
0.21 points
Required information
Foundational 131
1.  Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)  

References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 131Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
2.
value:
0.21 points
Required information
Foundational 132
2a.  What are the project’s annual net cash inflows? 
2b.  What is the present value of the project’s annual net cash inflows? (Round discount factor to 3 decimal places) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 132Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
3.
value:
0.21 points
Required information
Foundational 133
3.  What is the project’s net present value? (Round discount factor(s) to 3 decimal places and final answer to the nearest whole dollar amount.) 
rev: 04_23_2015_QC_CS13345
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 133Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
4.
value:
0.21 points
Required information
Foundational 135
5.  What is the project profitability index for this project? (Round discount factor(s) to 3 decimal places and final answer to 2 decimal places.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 135Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
5.
value:
0.21 points
Required information
Foundational 136
6.  What is the project’s internal rate of return?(Round your answer to nearest whole percent.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 136Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
6.
value:
0.21 points
Required information
Foundational 137
7.  What is the project’s payback period? (Round your answer to 2 decimal places.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 137Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
7.
value:
0.21 points
Required information
Foundational 138
8.  What is the project’s simple rate of return for each of the five years?(Round your answer to 2 decimal places. i.e. 0.12342 should be considered as 12.34%.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 138Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
8.
value:
0.21 points
Required information
Foundational 139
9.  If the company’s discount rate was 14% instead of 12%, would you expect the project’s net present value to be higher, lower, or the same? 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 139Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
9.
value:
0.21 points
Required information
Foundational 1310
10.  If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project’s payback period to be higher, lower, or the same? 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1310Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
10.
value:
0.21 points
Required information
Foundational 1311
11.  If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project’s net present value to be higher, lower, or the same? 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1311Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
11.
value:
0.21 points
Required information
Foundational 1312
12.  If the equipment had a salvage value of $300,000 at the end of five years, would you expect the project’s simple rate of return to be higher, lower, or the same? 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1312Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
12.
value:
0.21 points
Required information
Foundational 1313
13.  Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 50%. What was the project’s actual net present value? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount.) 
rev: 04_23_2015_QC_CS13345
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1313Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
13.
value:
0.21 points
Required information
Foundational 1314
14.  Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 50%. What was the project’s actual payback period? (Round your answer to 2 decimal places.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1314Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.
Check my work
14.
value:
0.27 points
Required information
Foundational 1315
15.  Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 50%. What was the project’s actual simple rate of return? (Round your answer to 2 decimal places. i.e. 0.12342 should be considered as 12.34%.) 
References
eBook & Resources
WorksheetLearning Objective: 1301 Determine the payback period for an investment.Learning Objective: 1305 Rank investment projects in order of preference.
Foundational 1315Learning Objective: 1302 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 1306 Compute the simple rate of return for an investment.
Difficulty: 2 MediumLearning Objective: 1303 Evaluate the acceptability of an investment project using the internal rate of return method.