A company is considering an investment in a new product with a 10-year horizon (product will be sold for 10 years). The upfront investment is $5 million and it is assumed to depreciate on a straight-line basis for 10 years, with no residual value. Fixed costs are assumed to be $550,000 per year. The company estimatesvariable cost per unit (v) to be $120 and expects to sell each unit for $425. There are no taxes and the required rate of return is 17% per year. Assume that the investment would occur today, and all future cash-flows will occur at the end of each year beginning in one year.

What is the annual financial breakeven quantity?

Answer rating: 100% (QA)

To find the annual financial breakeven quantity we need to determine the number of units that need t... View the full answer