Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $214,000. The machinery costs $2.1 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?(Do not round intermediate calculations.)

b.What is the NPV break-even level of diamonds sold per year assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%?(Do not round intermediate calculations. Round your answer to the nearest whole number.)

You are evaluating a project that will require an investment of $17 million that will be depreciated over a period of 10 years. You are concerned that the corporate tax rate will increase during the life of the project.

a.Would this increase the accounting break-even point?

Yes

No

b.Would it increase the NPV break-even point?

Yes

No

Modern Artifacts can produce keepsakes that will be sold for $60 each. Non depreciation fixed costs are $1,400 per year, and variable costs are $30 per unit. The initial investment of $5,000 will be depreciated straight-line over its useful life of 5 years to a final value of zero, and the discount rate is 12%.

a.What is the accounting break-even level of sales if the firm pays no taxes?(Do not round intermediate calculations. Round your answer to the nearest whole number.)

b.What is the NPV break-even level of sales if the firm pays no taxes?(Do not round intermediate calculations. Round your answer to the nearest whole number.)

c.What is the accounting break-even level of sales if the firm's tax rate is 20%?(Do not round intermediate calculations. Round your answer to the nearest whole number.)

d.What is the NPV break-even level of sales if the firm's tax rate is 20%?(Do not round intermediate calculations. Round your answer to the nearest whole number.)

You estimate that your cattle farm will generate $0.15 million of profits on sales of $3 million under normal economic conditions and that the degree of operating leverage is 2.(Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers in millions.)

a.What will profits be if sales turn out to be $1.5 million?

b.What if they are $4.5 million?