Break-Even. Reconsider Finefodder’s new superstore. Suppose that by investing an additional

$600,000 initially in more efficient checkout equipment, Finefodder could reduce variable costs to 80 percent of sales.

a. Using the base-case assumptions (Table 5.1), find the NPV of this alternative scheme.

Hint: Remember to focus on the incremental cash flows from the project.

b. At what level of sales will accounting profits be unchanged if the firm invests in the new equipment? Assume the equipment receives the same 12-year straight-line depreciation treatment as in the original example. Hint: Focus on the project’s incremental effects on fixed and variable costs.

c. What is the NPV break-even point?