Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Engineering Economics Analysis

Authors: Ted G. Feller

9th Edition

9780195168075

More Books

Students also viewed these Corporate Finance questions