Electric tricycle line-what is break-even number of units

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Reference no: EM13850177

You run a toy company that is considering updating your electric tricycle line. The upgrades will cost $30 million and will add a fixed cost of $1 million per year, but will decrease your variable costs by $40 per unit. This project will be good for 5 years. Assume 5-year straight-line depreciation, a 40% tax rate, and a 10% cost of capital.

a. What is the NPV of this project if you sell 300,000 units per year?

b. What is the break-even number of units you must sell in order to make this project profitable?

Reference no: EM13850177

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