apter 10 Post Class Quizi
21
Saved
Help
Save & Exit
Cardinal Company is considering a project that would require a $2,975,000 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:
eBook
Sales
Variable expenses
Contribution margin
$2,735,000
1,000,000
1,735,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket
costs
Depreciation
Total fixed expenses
Net operating income
$735,000
535,000
1,270,000
$ 465,000
Required:
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 45%. What was the project's actual simple rate of return? (Round your answer to 2 decimal places.)
Simple rate of retum
%