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Cardinal Company is considering a project that would require a $2,792,000 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 $400,000. The company's discount rate is 14%. The project would provide net operating income each year as follows: 2,875,000 Sales $ Variable expenses 1,124,000 1,751,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation $ 721,000 478,400 Total fixed expenses 1,199,400 Net operating income $ 551,600 Required: 1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers.) 2 Sales Variable expenses 2 Advertising, salaries, and other fixed out-of-pocket costs expenses 2 Depreciation expense value: 1.00 points Required information 2. What are the project's annual net cash inflows? Annual net cash inflow 7. What is the project's payback period? (Round your answer to 2 decimal places.) Project's payback period value Required information 1.00 points 8. What is the project's simple rate of return for each of the five years? (Round your answer to 2 decimal places. ( 0.1234 should be entered as 12.34.)) Simple rate of return value 1.00 points Required information 9. If the company's discount rate was 16% instead of 14%, would you expect the project's net present value to be higher than, lower than, or the same? OOO Higher Lower Same Required information value 1.00 points 10.If the equipment's salvage value was $600,000 instead of S400,000, would you expect the project's payback period to be higher than, lower than, or the same? Lower Higher Same

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