Hello,

Please can someone tell me how to calculate the break even point on Chapter 11 Question 7. Please see the attached.

Thank you,

Cindy

Chapter 9 Question 7 Calculating IRR [LO5] A firm evaluates all of its projects by applying the IRR rule. If the required is 14 percent, should the firm accept the following project? Year 0 1 2 3 Cash Flow -26,000 11,000 14,000 10,000 IRR = 16.69% Yes it is higher than 14%. Required Return 14% Question 8 Calculating NPV [LO1] For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 perc Year Cash Flow -26,000 11,000 14,000 10,000 0 1 2 3 Required Return Chapter 10 Question 3 11% NPV IRR = $2,328.41 YES 16.69% Yes it is higher than 11%. No it is lower than the required return of 24% 24% NPV NO Calculating Projected Net Income [LO1] A proposed new investment has projected sales of $6 Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro f $124,590 What is the projected net income? Sales Variable Costs Fixed Costs Depreciation Tax Rate Proformat Statement Sales Variable Costs Contribution Margin Fixed Costs Depreciation EBT $635,000 44% $193,000 $54,000 35% $635,000 $279,400 $355,600 $193,000 $54,000 $108,600 Income Taxes Income Cash Flow $38,010 $70,590 $124,590 Project Evaluation [LO1] Dog Up! Franks is looking at a new sausage system with an installed This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sa The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? Question 13 Installed Cost Working Capital Life of asset (yrs) Salvage Value Pre Tax Savings Tax Rate Discount Rate 10% Step 1 Compute Cash Flow ($540,000) Assets Cost $29,000 Working Cap Invested 0 Pre Tax Savings $80,000 Depreciation 170,000 Taxable Savings 34% Taxes Paid 10% Net Cash Flow Salvage Value Total Cash Flow 0 ($540,000) -$29,000 1 $170,000 $92,000 ($569,000) ($569,000) Chapter 11 Question 1 Calculating Costs and Break-Even [LO3] Night Shades, Inc. (NSI), manufactures biotech sun The variable materials cost is $9.64 per unit, and the variable labor cost is $8.63 per unit. a. What is the variable cost per unit? b. Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year? c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point? Variable Material Cost Variable Labor Cost Variable Cost Per Unit Fixed Costs Units Produced Total Cost $9.64 per unit $8.63 per unit $18.27 $915,000 215,000 $4,843,050 Break Even Selling Price Contribution Margin Per Unit Total Contribution Dollars Fixed Cost Profit or Loss 42,127 $39.99 per unit $21.72 $3,928,050 $915,000 $3,754,800 Does not include depreciation. Large profit Question 7 Calculating Break-Even [LO3] In each of the following cases, calculate the accounting break-e Ignore any tax effects in calculating the cash break-even. irm uses the NPV decision rule. hat if the required return is 24 percent? the required return. n the required return of 24% ($2,241.18) vestment has projected sales of $635,000. ciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. sausage system with an installed cost of $540,000. ear life, at the end of which the sausage system can be scrapped for $80,000. ng costs, and the system requires an initial investment in net working capital of $29,000. e NPV of this project? 2 3 . (NSI), manufactures biotech sunglasses $8.63 per unit. al production is 215,000 units. ak-even point? depreciation. 4 5 , calculate the accounting break-even and the cash break-even points