Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is

Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $217,000. The machinery costs $2.6 million and is depreciated straight-line over 10 years to a salvage value of zero.

a)

What is the accounting break-even level of sales in terms of number of diamonds sold?

b)

What is the NPV break-even level of sales assuming a tax rate of 30%, a 10-year project life, and a discount rate of 10%?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Agricultural Finance

Authors: Charles Moss

1st Edition

0415599075, 978-0415599078

More Books

Students also viewed these Finance questions