PLEASE show work so I understand process. Cardinal Company Is considering a five

Question

PLEASE show work so I understand process.

Cardinal Company Is considering a five-year project that would require a $2,975,000 Investment In equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating Income In each of flve years as follows: Sal Varlable expenses $2,735,000 1,000,000 1,735,000 Contribution margin Fixed expenses: Advertising, salaries, and other $ 735,000 595,000 fixed out-of-pocket costs Depreclation Total flxed expenses Net operating Income 1330,000 405,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables

Explanation / Answer

Annual cash Flow = Sales*(1-variable expenses ratio) - Cash Fixed Expenses

Annual cash Flow = 2735000*(1-45%) - 735000

Annual cash Flow = $ 769,250

Net Present Value = -Initial Investment + Actual Annual Cash Flow*PVIFA(14%,5)

Net Present Value = -2975000+ 769250*3.433

Net Present Value = - 334,165

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