3. Modern company can produce handbags that will be sold for $120 each. Non-depreciation fixed costs are

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3. Modern company can produce handbags that will be sold for $120 each. Non-depreciation fixed costs are $1000 per year, and variable costs are $60 per unit. The initial investment of $3000 will be depreciated straight-line over its useful life of 5 years to a final value of zero, and the discount rate is 10%.

a) What is the accounting break-even level of sales if the firm pays no taxes?

b) What is the NPV break-even level of sales if the firm pays no taxes?

c) What is the accounting break-even level of sales if the firm's tax rate is 35%?

d) What is the NPV break-even level of sales if the firm's tax rate is 35%?

Posted Date: Jul 10, 2024 01:08 PM

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3. Modern company can produce handbags that will be sold for $120 each. Non-depreciation fixed costs are

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