Question
The economic life of the machine we purchased for $6,000,000 is 5 years, the depreciation method is linear, cost of capital is 20%, and the
The economic life of the machine we purchased for $6,000,000 is 5 years, the depreciation method is linear, cost of capital is 20%, and the tax rate is 20%. The project (this machine) will have $0 salvage value after 5 years. We are informed that projected revenues for the next 5 years are $4,200,000 per year, variable costs are 25 percent of the projected revenue, projected fixed costs are $600,000 per year for the next 5 years.
Accordingly, calculate the amount of revenues from a point of accounting and finance break-even analyses.
Investment (Year 0) | Cash Flows in years 1-5 Projected | Accounting Break-Even | Financial Break - Even | ||
Initial Investment | | |
| ||
Revenues |
|
|
| ||
Costs | |||||
Variable Costs | |
|
|
| |
Fixed Costs | |
|
|
| |
Depreciation |
|
|
| ||
Pretax Profit |
|
| |||
Tax (20%) |
|
| |||
Profit After Tax |
|
| |||
|
|
| |||
Cash Flow from Operations(CFFO) |
|
|
Step by Step Solution
3.50 Rating (173 Votes )
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Engineering Economics Analysis
Authors: Ted G. Feller
9th Edition
9780195168075
Students also viewed these Corporate Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App