BUSINESS
Foundational [LO131, LO132, LO133, LO135, LO136]
[The following information applies to the questions displayed below.] 
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
Required: 
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