1. 25.

Break-even and taxes [LO 11.3] This problem concerns the effect of taxes on the various break-even measures.

1. Show that, when we consider taxes, the general relationship between operating cash flow, OCF, and sales volume, Q, can be written as:

2. Use the expression in part

(a) to find the cash, accounting and financial break-even points for the Wettway sailboat example in the chapter. Assume a 30 per cent tax rate.

3. In part (b), the accounting break-even should be the same as before. Why? Verify this algebraically.

Transcribed Image Text:

FC + Q= OCF - TC x D 1 Tc P-v