. Break-Even Volume and Investment. For several years, Grabski Company has used a combination of its own equipment and rental equipment to handle materials. The company has its own equipment to handle routine work but must rent equipment to handle particularly bulky materials. The cost to rent equipment has been estimated to average \(\$ 4,000\) a year.

An evaluation of cash operating expenses indicates that the company can save \(\$ 0.15\) per cubic yard of materials by buying its own equipment instead of renting equipment. An equipment manufacturer offers the necessary additional equipment at a cost of \(\$ 80,000\). The equipment will probably have a useful life of six years with no salvage value.

Uncertainty exists with respect to how much work will be required from the new equipment if it is purchased. Estimates of the number of cubic yards that might possibly be handled in each of the six years are 80,000 cubic yards, 100,000 cubic yards, or 120,000 cubic yards. On this type of investment, a 15 percent discounted return is considered to be appropriate. Ignore taxes.
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1. Can the investment meet the minimum rate-of-return requirement if 80,000 cubic yards are handled? 100,000 cubic yards? 120,000 cubic yards?
2. Determine the break-even volume, that is, the number of cubic yards at which the investment can just meet the 15 percent return requirement. Round all amounts to the nearest dollar.