Calculate the breakeven level of production

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Question - RealityView, LLC. is a pioneering company in 3-D imaging technology. The company, which is currently operating at its full capacity, is considering a capacity-increase investment project. The project requires an initial outlay of $28.5 million that includes $25 million for new equipment expected to last 5 years with zero-book value and $3.5 million for working capital. The selling price of each system is $40,000. Through options and futures contracts, the company plans to keep variable costs per system to 60% of the price. The project requires $4 million/year of fixed cost. As a result of the proposed expansion, annual sales are expected to increase by 2,000 units a year during the project's life. The hurdle rate for the project is 10% per year, and the reinvestment rate of the project's CF is 15%. The Federal-to-state tax rate is 25%.

a. Calculate NPV, IRR, PI, and MIRR? Should the company accept the project?

b. Use the CCF method to calculate conventional and discounted payback periods.

c. Calculate the breakeven level of production.

d. Calculate the zero-NPV level of production.

Reference no: EM133038666

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