1. Consider an investment project whose initial cost which is also equal to its capital cost is $30 million. The life of the project is 15 years and it is estimated to have a zero salvage value. Depreciation on this asset will be claimed on a declining balance basis at the d rate of 20%. The first year one-half rule will apply. The product the project will produce will be sold at $10,000 per unit and variable costs per unit is $6,000. Assume annual fixed cost of the project of $4 million over the life of the project, corporate tax rate of 30% and costs of capital at 10% per annum. Find the financial break-even level of projects output. If the forecasted incremental output of the project is 2,240 units, is the project acceptable?

The same data as on the previous question, but add the following information:

1. The salvage value of the equipment is$6,000,000 at the end of 15^th year, and
2. In addition to capital cost of $30,000,000, the firm has to incur also $5,000,000 non-capital costs as the part of the initial cost.

Redo the financial breakeven analysis of the project with the same forecasted level of incremental output of 2,240 units.