Question
Nike is investing in new machinery. The discount rate is 10%, and the initial investment in equipment $12.5 million. The machinery's economic life is 25
Nike is investing in new machinery. The discount rate is 10%, and the initial investment in equipment $12.5 million. The machinery's economic life is 25 years and the equipment will be depreciated on a straight-line basis over the project's life and has no salvage value. The following financial information is estimated for production from the machinery:
Sales price per shirt: $65 Sales price per pant: $115 Variable Costs per shirt: $2.75
Variable Costs per pant: $5.00 Fixed Costs of production per Year: $140,000 Tax Rate=21%
Number of shirts sold per year: 10,100 Number of pants sold per year: 9,750
What is the accounting break-even level for the production of a) shirts, and b) pants?
What is the financial break-even level for the production of a) shirts, and b) pants?
What is the base-cash cash flow of this project (i.e., accounting for both shirts and pants)?
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