Question
Hi Tutor, please show me step by step calculation for the below questions: 3 (b). A project has the following estimated data: Price RM57 per
Hi Tutor, please show me step by step calculation for the below questions:
3 (b). A project has the following estimated data:
Price | RM57 per unit |
Variable cost | RM32 per unit |
Fixed costs | RM9,000 |
Required return | 12% |
Initial investment | RM18,000 |
Life | 4 years |
Ignore the effect of taxes, calculate;
(i) Accounting break-even quantity.
(4 marks)
Q = FC + D / P v
= Fixed Costs + (RM18,000 /4) / (Sales price per unit Variable costs per unit)
= RM 9,000 + 4,500 / ( 57 32)
= ?
(ii) Cash break-even quantity.
(3 marks)
Q = FC / P v
= ?
(iii) Financial break-even quantity.
(9 marks)
Please include a short paragraph on what happens to the project NPV at the financial breakeven.
(iv) Degree of operating leverage at financial break-even level of output.
(3 marks)
DOL = FC / OCF
= ?
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