L.J.'s Toys, Inc., just purchased a $375,000 machine to produce toy cars. The machine will be fully

Question:

L.J.'s Toys, Inc., just purchased a $375,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its five-year economic life. Each toy sells for $21. The variable cost per toy is $8, and the firm incurs fixed costs of $280,000 each year. The corporate tax rate for the company is 34 percent. The appropriate discount rate is 12 percent. What is the financial break-even point for the project?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...