Question

Is
there a relationship between break-even point and cost of
capital?

Answer #1

Solution:

For a break-even point is that point where there is no profit and no loss. In other terms, we can say that the NPV is zero at the breakeven point. NPV is the discounted value of future cash flows. Lower the discount rate, higher will be the present value hence break-even will be reached early

NPV = -Initial cost + PV of future cash flow

NPV = -Initial cost + FV1 / (1+cost of capital) + FV2 / (1+cost of capital)^2 + ..................

Hence we can say that there is a direct relationship between break-even point and the cost of capital. Lower the cost of capital, lower will be the break-even-point.

In
a cost volume profit analysis, what happens at the break even point
and why companies do not want to remain at the break even
point?

Break-Even Point
Hilton Enterprises sells a product for $115 per unit. The
variable cost is $76 per unit, while fixed costs are $357,435.
Determine (a) the break-even point in sales units and (b) the
break-even point if the selling price were increased to $123 per
unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were
increased to $123 per unit
units
Target Profit
Trailblazer Company sells a product for $245 per unit. The
variable...

Break-Even Point
Nicolas Enterprises sells a product for $95 per unit. The
variable cost is $43 per unit, while fixed costs are
$1,116,752.
Determine (a) the break-even point in sales units and (b) the
break-even point if the selling price were increased to $102 per
unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were
increased to $102 per unit
units

Break-Even Point
Nicolas Inc. sells a
product for $62 per unit. The variable cost is $38 per unit, while
fixed costs are $69,120.
Determine (a) the
break-even point in sales units and (b) the break-even point if the
selling price were increased to $68 per unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were
increased to $68 per unit
units

Break-Even Point
Hilton Enterprises sells a product for $104 per unit. The
variable cost is $51 per unit, while fixed costs are
$1,160,117.
Determine (a) the break-even point in sales units and (b) the
break-even point if the selling price were increased to $110 per
unit.
a. Break-even point in sales units
units
b. Break-even point if the selling price were
increased to $110 per unit
units

If variable cost per unit decreases, then contribution margin
_________ and break-even point _________.

In a cost-volume-profit analysis, explain what happens at the
break-even point and why companies do not want to remain at the
break-even point..

Break-Even Calculations Compute the break-even point in units
for each of the following independent situations: Unit Selling
Price Unit Variable Cost Total Fixed Cost a. $10 $7 $45,000 b. 12 9
72,000 c. 5 3 27,000 a. Answer units b. Answer units c. Answer
units

Break-Even Calculations Compute the break-even point in units
for each of the following independent situations: Unit Selling
Price Unit Variable Cost Total Fixed Cost a. $10 $7 $180,000 b. 12
9 288,000 c. 5 3 108,000 a. Answer units b. Answer units c. Answer
units

). How is break even point determined

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