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Therefore, instead of asking what sales must be to produce an accounting profit, it is more useful to focus on the point at which NPV

Therefore, instead of asking what sales must be to produce an accounting profit, it is more
useful to focus on the point at which NPV switches from negative to positive. This is called the
NPV break-even point.
The cash flows of the superstore project in each year will depend on sales as follows:
This cash flow will last for 12 years. So to find its present value we multiply by the 12-year
annuity factor. With a discount rate of 8%, the present value of $1 a year for each of 12 years is
$7.536. Thus the present value of the cash flows is
PV( cash flows )=7.536(.1125 sales -$1.02 million )
The project breaks even in present value terms (that is, has a zero NPV) if the present value of
these cash flows is equal to the initial $5.4 million investment. Therefore, break-even occurs
when
PV( cash flows )= investment
7.536(.1125 sales -$1.02 million )=$5.4 million
.8478 sales -$7.69 million =$5.4 million
Sales =5.4+7.69.8478=$15.4 million
Therefore, the store needs sales of $15.4 million a year for the investment to have a zero NPV.
This is more than 18% higher than the point at which the project has zero profit. Can you break this down in a more simple terms. where did the .8478 and 7.69 come from? show the full working of the cash flow as well. Thankyou.
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