10. Break-Even. Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each dia- mond can be...
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10. Break-Even. Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each dia- mond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million and is depreciated straight-line over 10 years to a salvage value of zero. (LO2)
a. What is the accounting break-even level of sales in terms of number of diamonds sold?
b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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