Question
Aydens Toys, Incorporated, just purchased a $460,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 6-year
Aydens Toys, Incorporated, just purchased a $460,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 6-year economic life. Each toy sells for $16. The variable cost per toy is $5 and the firm incurs fixed costs of $320,000 per year. The corporate tax rate for the company is 25 percent. The appropriate discount rate is 13 percent. What is the financial break-even point for the project?
My book explains how to do the accounting break-even, but it doesn't really explain the financial break-even very well. Thanks.
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