Question
You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $44.00
You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: |
Sales price per abalone | = | $44.00 |
Variable costs per abalone | = | $10.95 |
Fixed costs per year | = | $474,000 |
Depreciation per year | = | $116,000 |
Tax rate | = | 25% |
The discount rate for the company is 17 percent, the initial investment in equipment is $928,000, and the projects economic life is 8 years. Assume the equipment is depreciated on a straight-line basis over the projects life and has no salvage value. |
a. | What is the accounting break-even level for the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What is the financial break-even level for the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Step by Step Solution
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 Started