Consider a project with a 6-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 $72 per unit and fixed costs are $10,000 per year. The project has a required return of 16%. Ignore taxes.

1.How many units must be sold for the project to achieve accounting break-even?

2.How many units must be sold for the project to achieve cash break-even?

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

4.What is the degree of operating leverage at the financial break-even?