Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your buddy comes to you with a sure-fire way to make some quick money and help pay off your student loans. His idea is to
Your buddy comes to you with a sure-fire way to make some quick money and help pay off your student loans. His idea is to sell T-shirts with the words I get on them. You get it? He says, You see all those bumper stickers and T-shirts that say got milk or got surf. So this says, I get. Its funny! All we have to do is buy a used silk screen press for $9,000 and we are in business! Assume there are no fixed costs and you depreciate the $9,000 in the first period. The tax rate is 23 percent. a. What is the accounting break-even point if each shirt costs $4.35 to make and you can sell them for $15.90 apiece? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Now assume one year has passed and you have sold 7,700 shirts! You find out that the Dairy Farmers of America have copyrighted the got milk slogan and are requiring you to pay $29,000 to continue operations. You expect this craze will last for another 3 years and that your discount rate is 15 percent. What is the financial break-even point for your enterprise now? (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