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Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $205,000. The machinery costs $1.6 million and is depreciated straight-line over 10 years to a salvage value of zero.
a. What is the accounting break-even level of sales in terms of number of diamonds sold? (Do not round intermediate calculations.)
b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 30%, a 10-year project life, and a discount rate of 10% (Do not round intermediate calculations. Round your answer to the nearest whole number.)
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