Apricotte produces highly specialized software for the specific needs of large multinational corporations. The corporation considers a
Question:
Apricotte produces highly specialized software for the specific needs of large multinational corporations. The corporation considers a project to start a business in hardware. The anticipated project will last 5 years. The project requires $250,000 investment in plant and equipment which will be depreciated to a salvage value of zero in five years using a straight -line depreciation method. The market value of the equipment will be zero at the end of the fifth year. The marginal tax rate for this corporation is 35 percent, and the opportunity cost of capital is 15 percent. Each computer produced by Apricottee will be sold for $1,000 a piece. The direct labor and material cost is $600 per unit and annual fixed costs is $50,000 (excluding depreciation). What is the net profit break even production level?