Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $130.
Question:
Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $130. The material cost of a standard diamond is $80. The fixed costs incurred each year for factory upkeep and administrative expenses are $206,000. The machinery costs $1.2 million and is depreciated straight-line over 10 years to a salvage value of zero.
What is the accounting break-even level of sales in terms of the number of diamonds sold?
Note: Do not round intermediate calculations.
What is the NPV break-even level of sales assuming a tax rate of21%, a 10-year project life, and a discount rate of 12%?
Note: Do not round intermediate calculations. Round your answer up to the nearest whole unit.
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus