Question
Problem 11-29 Break-Even Analysis [LO3] This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 20,000
Problem 11-29 Break-Even Analysis [LO3]
This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,000,000 investment in threading equipment to get the project started; the project will last for four years. The accounting department estimates that annual fixed costs will be $850,000 and that variable costs should be $450 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the four-year project life. It also estimates a salvage value of $280,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $600 per ton. The engineering department estimates you will need an initial net working capital investment of $300,000. You require a 18 percent return and face a marginal tax rate of 38 percent on this project. |
Calculate the accounting, cash, and financial break-even quantities. (Do not round intermediate calculations and round your final answers to the nearest whole number. (e.g., 32)) |
Cash break-even | ||
Accounting break-even | ||
Financial break-even | ||
Please make detailed steps for the financial break even |
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