1. Consider a project with a 3-year life and no salvage value. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project.

The price per unit is $90, variable costs are $40 per unit and fixed costs are $40,000 per year (excluding depreciation). The project has a required return of 14%. Ignore taxes.

How many units must be sold for the project to break even from an operating cash flow perspective (cash break-even)?

2. Consider a project with a 3-year life and no salvage value. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project.

The price per unit is $90, variable costs are $40 per unit and fixed costs are $40,000 per year. The project has a required return of 10%. Ignore taxes.

How many units must be sold per year for the project to achieve financial break-even?