Question
A corporation needs a machine that costs $1 million and net working capital of $100,000 for an investment project. Assume that depreciation is straight-line to
A corporation needs a machine that costs $1 million and net working capital of $100,000 for an investment project. Assume that depreciation is straight-line to zero over the 5 year life of the machine. The project has a 4 year life and the machine will have an expected market value of $300,000 at the end of the project. Sales are expected to be 70,000 units per year. Price per unit is expected to be $50, variable costs per unit is expected to be $34, and fixed costs are expected to be $800,000 per year. The tax rate is expected to be 25%. The company requires a 10% return on this project, what is the numerical value of the financial break even quantity?
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