Question
Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $4,800,000 investment in threading
Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $4,800,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,150,000 and that variable costs should be $215 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $525,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $320 per ton. The engineering department estimates you will need an initial net working capital investment of $460,000. You require a return of 14 percent and face a tax rate of 25 percent on this project. Calculate the accounting, cash, and financial break-even quantities.
Step by Step Solution
3.37 Rating (163 Votes )
There are 3 Steps involved in it
Step: 1
Accounting Breakeven quantity 2009523 tons Cash Breakeven quantity 1095238 tons Financial Breakeven ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started