Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond

can be sold for $130. The materials cost for a standard diamond is $80. The xed costs

incurred each year for factory upkeep and administrative expenses are $206,000. The

machinery costs $1.2 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? Break-even sales |:|

b. What is the NPV break-even level of sales assuming a tax rate of 21%, a 10-year

project life, and a discount rate of 12%? (Do not round intermediate calculations.

Round your answer to the nearest whole number.) Break-even sales |:|

a)

Break even level of sale = (fixed cost + Depreciation)/(Diamond cost - standard diamond)

Break even level of sale = (206000+120000)/(130-80)

= 6520

I got the answer for a, struggling with b, I know my my PV of annuity value is 5.650 but after that, I'm lost

b) ????