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Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment...

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Accounting

Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 18%. The project would provide net operating income in each of five years as follows:

Sales $ 2,857,000
Variable expenses 1,011,000
Contribution margin 1,846,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $ 799,000
Depreciation 570,000
Total fixed expenses 1,369,000
Net operating income $ 477,000

5. What is the project profitability index for this project?

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