Cardinal Company is considering a five-year project that would require a $2,890,000 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 $ 2,739,000
Variable expenses 1,100,000
Contribution margin 1,639,000
Fixed expenses:
Advertising, salaries, and
other fixed out-of-pocket costs $ 641,000
Depreciation 578,000
Total fixed expenses 1,219,000
Net operating income $ 420,000
A. What are the project's annual net cash inflows?
B. What is the project's net present value?
C. What is the project profitability index for this project?
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