Cardinal Company is considering a project that would require a $2,755,000 invest
ID: 2526641 • Letter: C
Question
Cardinal Company is considering a project that would require a $2,755,000 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 $300,000. The company’s discount rate is 14%. The project would provide net operating income each year as follows:
If you could tell me how to figure it, not just that answer, that would be awesome. Thanks!
Cardinal Company is considering a project that would require a $2,755,000 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 $300,000. The company’s discount rate is 14%. The project would provide net operating income each year as follows:
Explanation / Answer
Simple Rate of Return = Average Net Profit / Intial Investment Simple Rate of Return = $568,000 / $2,755,000 Simple Rate of Return = 20.62% (Approx.)