Problem 10-14 NPV Break-Even Analysis (LO3)

Modern Artifacts can produce keepsakes that will be sold for $100 each. Nondepreciation fixed costs are $1,300 per year, and variable costs are $70 per unit. The initial investment of $4,000 will be depreciated straight-line over its useful life of 5 years to a final value of zero, and the discount rate is 12%.

a. What is the accounting break-even level of sales if the firm pays no taxes?

b. What is the NPV break-even level of sales if the firm pays no taxes?

c. What is the accounting break-even level of sales if the firms tax rate is 30%?

d. What is the NPV break-even level of sales if the firms tax rate is 30%?