Cardinal Company is considering a five-year project that would require a $2,800,000 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 five years as follows:
Sales $2,845,000
Variable expenses 1,109,000
Contribution margin 1,736,000
Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $799,000 Depreciation 560,000 Total fixed expenses 1,359,000
Net operating income $377,000