11. Break-even analysis (S10.2) Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold...
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11. Break-even analysis (S10.2) Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a synthetic 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.
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
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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