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Calculate the accounting break-even

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Question - Luckin Coffee considers launching its new product line of raw coconut latte. The per-cup price is $3, and the variable cost is $1. Based on reliable estimation, the fixed cost will be $300,000 per year. The total investment to undertake the project is $3,000,000. This amount will be depreciated straight-line to zero over the five-year life of the equipment and plant. Again, for simplicity, the salvage value is zero and there are no working capital consequences. Luckin Coffee has a 20 percent required return on new projects and the tax rate is 21%. Calculate the accounting break-even and the financial break-even?

Reference no: EM133067787

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