Foundational | Accounting homework help

Foundational [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6]

 [The following information applies to the questions displayed below.]

 Cardinal Company is considering a five-year 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 out-of-pocket costs \$ 709,000 Depreciation 569,000 Total fixed expenses 1,278,000 Net operating income \$ 465,000

 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

References

Section BreakFoundational [LO13-1, LO13-2, LO13-3, LO13-5, LO13-6]

1.

value:
0.21 points

Required information

Foundational 13-1

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.)

 Sales Variable expenses Advertising, salaries, and other fixed out-of-pocket costs expenses Depreciation expense

References

eBook & Resources

WorksheetLearning Objective: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-1Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 Evaluate the acceptability of an investment project using the internal rate of return method.

2.

value:
0.21 points

Required information

Foundational 13-2

 2-a. What are the project’s annual net cash inflows?

 2-b. 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-2Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-3

 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_CS-13345

References

eBook & Resources

WorksheetLearning Objective: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-3Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-5

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-5Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-6

 6 What is the project’s internal rate of return?(Round your answer to nearest whole percent.)

References

eBook & Resources

WorksheetLearning Objective: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-6Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-7

 7 What is the project’s payback period? (Round your answer to 2 decimal places.)

References

eBook & Resources

WorksheetLearning Objective: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-7Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-8

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-8Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-9

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-9Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-10

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-10Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-11

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-11Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-12

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-12Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-13

 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_CS-13345

References

eBook & Resources

WorksheetLearning Objective: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-13Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-14

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-14Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 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 13-15

 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: 13-01 Determine the payback period for an investment.Learning Objective: 13-05 Rank investment projects in order of preference.

Foundational 13-15Learning Objective: 13-02 Evaluate the acceptability of an investment project using the net present value method.Learning Objective: 13-06 Compute the simple rate of return for an investment.

Difficulty: 2 MediumLearning Objective: 13-03 Evaluate the acceptability of an investment project using the internal rate of return method.

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