This is 30 Dec 2012 and Morgan Corporation is considering the replacement of an old machine that is currently being used. If Morgan decides to replace the old machine, Walters Company has offered to purchase it for $1,000,000 on the replacement date. The old machine would have no salvage value in 2017 (after 5 years of its life).

If the replacement occurs, a new machine will be acquired from Texpak Industries on January 2, 2013. The purchase price of $3,000,000 for the new machine will be paid in cash at the time of replacement. At the end of its expected useful life after 2017 (5 years), the new machine is not expected to have any salvage value. Because of the increased efficiency of the new machine, estimated increase in production is 50 units more product with $8,000 price until 2017.

All operating cash receipts and operating cash expenditures are assumed to occur at the end of the year. The company has 40% tax rate and the projects discount rate is 15%.

What is the [financial] break-even point of production for this project? Hint: choose the best answer that matches with the optimal break-even policy.