Calculate the accounting break-even point

Assignment Help Business Economics
Reference no: EM133083867

Scenario analysis

Odion Manufacturers Ltd is evaluating a project that costs $280 000, has a seven-year life and no salvage value. Assume that depreciation is prime-cost to zero salvage over the seven years. Odion requires a return of 10 per cent on such projects. The tax rate is 30 per cent. Sales are projected at 60 000 units per year. Price per unit is $23.80, variable cost per unit is $ 10.52 and fixed costs an $100 000 per year.

a. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?

b. Calculate the base case cash flow and NPV. Suppose that you think that the sales projection is accurate only to within 25 per cent. Evaluate the sensitivity of NPV to changes in that projection.

c. Suppose the projections given are all accurate to within 5 per cent except for sales volume, which is accurate only to within 15 per cent. Calculate the NPV under the best and worst cases.

Reference no: EM133083867

Questions Cloud

Amazon 2014-16 cash flow : Why was Amazon's 2014-16 cash flow from operations higher than its net income?
Explain the effects on the consumer surplus : The USA imports 380,000 units of cellphones from China, and locally the USA produces 120,000 units. The world price for cellphones is $300 per unit.
Address book analogy of electron configuration : What is the Address Book Analogy of Electron Configuration?
Critical thinking : what values can businesses receive from hiring people with good communication skills?
Calculate the accounting break-even point : a. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?
Competition between providers of coal sourced electricity : This has led some coal plants to operate at less full capacity most of the time. How does this affect competition between providers of coal sourced electricity?
Reduce price to marginal cost : When firms compete on price but products are differentiated, do we expect competition to reduce price to marginal cost?
Mobile technologies and internet of things : Why are organizations applying this technology? Identify and describe one real-world example.
What is the status of access to health care : What is the status of access to Health Care in the Philippines in this time of pandemic.

Reviews

Write a Review

Business Economics Questions & Answers

  Monopolist price under third-degree price discrimination

Suppose there are two potential pools of customers for the gym. One group gets a high benefit from joining, but a smaller benefit from actually working out. Derive each consumer’s surplus before the fixed fee for a given variable price p. How will th..

  View of your future role in the field of it

How did the discussions affect your view of your future role in the field of IT?

  The simple interest for buying a passenger transit rail is

the simple interest for buying a passenger transit rail is shown as the product of the principle amount p time in years

  Examine the various criminal theories

In this assignment, you will examine the various criminal theories that were discussed in the reading. In a page or two, explain which theories best explain white collar crime.

  Explain how much money would the family spend on food

Suppose the club did NOT charge a membership fee: explain how much money would the family spend on food? How much food would the family buy?

  What are the monthly and nominal interest rates

Suppose you plan to purchase a car that costs a total of $28,540 and will finance 85% of this amount. If you are told by the auto-dealer that you can finance the car through them for $469 per month for the next 5 years, what are the monthly and nomin..

  Incentive for migration of low-skilled immigrants

Analyze these statement: "U.S. tariffs on imported products from low-wage foreign nations creates an incentive for migration of low-skilled immigrants

  Society-goods and services are allocated primarily

In our society, goods and services are allocated primarily based on

  Give some examples of how other religious traditions

Give some examples of how other religious traditions, from both inside and beyond South Asia, deal with issues of impermanence and suffering. In terms of religious ideology, what are effective ways of dealing with these issues?

  What is the net gain from trade measured in food-units

In the two countries, Techi and Aggi, the costs of all factors of production are constant, the factors are perfect substitutes for each other and thus equally productive (efficient). Currently, before trade, Techi’s residents prefer to produce and co..

  Difference between private and public goods

1. What is the difference between private and public goods? How ownership of private goods (property) may result in conflicts? Give suitable example to illustrate your answer.

  Describe one new method of land management

Describe one new method of land management that increased surplus food.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd