Cardinal Company is considering a five-year project that would require a $2,915,000 investment in equipment with a useful life of five years and no salvage value. Cardinal Company is considering a five-year project that would require a $2,915,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 16%. The project would provide net operating income in each of five years as follows:

Sales $2,863,000
Variable expenses 1,014,000

Contribution margin 1,849,000
Fixed expenses:
Advertising, salaries, and other
out-of-pocket costs $781,000
Depreciation 583,000

Total fixed expenses 1,364,000

Net operating income $485,000

Respond with workings:

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?

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.)

4. What is the project profitability index for this project? (Round discount factor(s) to 3 decimal places and final answer to 2 decimal places.)

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

6. Assume a post-audit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the project’s actual payback period? (Round your answer to 2 decimal places.)

7. Assume a post-audit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. 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%.)