1.Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The material cost for a standard 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.

What is the accounting break-even level of annual sales in terms of number of diamonds sold? Assume the company is in the 35% tax bracket.

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%?