Question
Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of
Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of cash flow. Dog Days is considering a proposal to produce and market a caviar-flavored dog food. It will involve an initial investment of $90,000 that can be depreciated for tax straight-line over 10 years. In each of years 1-10, the project is forecast to produce sales of $100,000, and to incur variable costs of 50% of sales and fixed costs of $30,000. The cost of capital is 10%. Suppose that you are worried that the corporate tax rate will be increased immediately after you commit to the project. Calculate the economic break-even rate of tax. ** Please with full explanation and steps **
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