Calculate the accounting-cash and financial break-even qua

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Reference no: EM131529290

This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,600,000 investment in threading equipment to get the project started; the project will last for four years. The accounting department estimates that annual fixed costs will be $850,000 and that variable costs should be $250 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the four-year project life. It also estimates a salvage value of $250,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $380 per ton. The engineering department estimates you will need an initial net working capital investment of $360,000. You require a return of 16 percent and face a marginal tax rate of 38 percent on this project.

Calculate the accounting, cash, and financial break-even quantities. (Do not round intermediate calculations and round your final answers to the nearest whole number, e.g., 32.)

Cash break-even

Accounting break-even

Financial break-even

Reference no: EM131529290

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