Cardinal Company is considering a project that would require a $2,725,000 invest
ID: 2500090 • Letter: C
Question
Cardinal Company is considering a project that would require a $2,725,000 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:
What is the project profitability index for this project? (Use the appropriate table to determine the discount factor(s) and final answer to 2 decimal places.
What is the project’s payback period? (Round your answer to 2 decimal places.)
If the company’s discount rate was 16% instead of 14%, would you expect the project's net present value to be higher than, lower than, or the same?
Same
If the equipment’s salvage value was $600,000 instead of $400,000, would you expect the project’s payback period to be higher than, lower than, or the same?
Higher
If the equipment’s salvage value was $600,000 instead of $400,000, would you expect the project's net present value to be higher than, lower than, or the same?
Cardinal Company is considering a project that would require a $2,725,000 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:
Explanation / Answer
Cardinal Company is considering a project that would require a $2,725,000 invest