Question

22. A company is considering a 5-year project that opens a new product line and requires...

22.

A company is considering a 5-year project that opens a new product line and requires an initial outlay of $80,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $20,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 10% per year, what is the cash break-even point? (Answer to the nearest whole unit.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Initial outlay : $80,000

selling price : $93 per unit

variable cost : $66 per unit

Fixed costs without Depreciation :  $20,000 per year

Rate of return : 10% per year

  • Converting Initial investment of $80,000 as an equivalent annual cost(EAC),

EAC =  Initial Investment / (5 year 10% annuity factor)

EAC = $80000 / 2.52719

EAC = $31655.6977

Total fixed cost : $20000 + $31655.6977 = $51655.6977 per year

BEP (units) = Fixed costs/Selling price per unit- variable costs per unit.

BEP (units) = $51655.6977/(93-66) =1913.1739 = 1914 Units

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
21. A company is considering a 5-year project that opens a new product line and requires...
21. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $85,000. The assumed selling price is $97 per unit, and the variable cost is $61 per unit. Fixed costs not including depreciation are $20,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 11% per year, what is the accounting break-even point? (Answer to the nearest whole unit.) 22....
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment € 5 million. The project is expected to generate € 1.4 million in annual sales, with costs of € 0.6 million per year for next 5 years. ABC uses the straight-line depreciation over the 5 years of project life (book value assumed to be zero at the end of the project). If the tax rate is 35%. What is the annual operating cash flow...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment € 4 million. The project is expected to generate € 1.4 million in annual sales, with costs of € 0.5 million per year for next 5 years. ABC uses the straight-line depreciation over the 5 years of project life (book value assumed to be zero at the end of the project). If ABC uses the straight-line depreciation over the 5 years of project life...
1. Miller Corp. is considering a new three-year expansion project that requires an initial fixed asset...
1. Miller Corp. is considering a new three-year expansion project that requires an initial fixed asset investment of $900,000. The fixed asset will be depreciated by the straight-line method over its three-year useful life. And, the salvage value is zero. Assume the tax rate is 35%. What is the depreciation tax shield per year? 2. Following #1, we’ll assume the straight-line depreciation is used. And, the salvage value is zero. The project is estimated to generate $500,000 in annual sales,...
You are considering a new product. It will cost $966,000 to launch, have a 3-year life,...
You are considering a new product. It will cost $966,000 to launch, have a 3-year life, and no salvage value. Depreciation is straight-line to zero. The required return is 20%, and the tax rate is 30%. Sales are projected at 80 units per year. Price per unit will be $40,000, variable cost per unit is $24,000 and fixed costs are $500,000 per year. Operating cash flows have been calculated for you as 642,600 per year. Suppose that the sales units,...
the quorum company has a prospective 6 year project that requires initial fixed assets of $963,000,...
the quorum company has a prospective 6 year project that requires initial fixed assets of $963,000, annual fixed $403,400, variable costs $123.60 per unit, sales price of $249, discount rate 14%, tax rate 21%. asset straight line depreciated to zero over life of project. compute accounting break even sales compute financial break even quantity
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment € 4 million. The project is expected to generate € 1.4 million in annual sales, with costs of € 0.5 million per year for next 5 years. ABC uses the straight-line depreciation over the 5 years of project life (book value assumed to be zero at the end of the project). If ABC uses the straight-line depreciation over the 5 years of project life...
the quorum company has a prospective 6 year project that requires initial fixed assets costing $963,000,...
the quorum company has a prospective 6 year project that requires initial fixed assets costing $963,000, annual fixed costs of $403,400, variable costs per unit of $123.60, a sales price per unit of $249, a discount rate of 14 percent, and a tax rate of 21 percent. the asset will be depreciated straight-line to zero over the life of the project. explain why as a manager calculating accounting break-even sales quantity and financial break-even sales quantity are important.
the quorum company has a prospective 6 year project that requires initial fixed assets costing $963,000,...
the quorum company has a prospective 6 year project that requires initial fixed assets costing $963,000, annual fixed costs of $403,400, variable costs per unit of $123.60, a sales price per unit of $249, a discount rate of 14 percent, and a tax rate of 21 percent. the asset will be depreciated straight-line to zero over the life of the project. compute the financial break-even sales quantity
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT