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Lee Inc. just purchased a digital color printer for $360,000 to launch its 5-year project. This printer will be fully depreciated by the straight-line method
Lee Inc. just purchased a digital color printer for $360,000 to launch its 5-year project. This printer will be fully depreciated by the straight-line method over its SIX-year economic life, and will be sold for $70,000 in five years at the termination of the project. The project requires an initial NWC investment of $75.000 that Lee Inc. can recover only 90% of the amount at the termination of the project. The tax rate is 21% and the discount rate is 12%, compounded monthly. In addition, the variable cost and selling price of the book are, respectively, $20 and $25 per copy, and annual fixed costs are $150,000. (a) Calculate the annual break-even operating cash flow of the publishing project, and clearly state your answer explicitly in a sentence. (b) Calculate the minimum number of copies that Lee needs to be able to sell annually to justify the acceptance of the publishing project.
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