The effect of taxes on various break-even measures

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Reference no: EM131926969

This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production. You will need an initial $5,400,000 investment in threading equipment to get the project started; the project will last for six years. The accounting department estimates that annual fixed costs will be $800,000 and that variable costs should be $350 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the six-year project life. It also estimates a salvage value of $280,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $450 per ton. The engineering department estimates you will need an initial net working capital investment of $520,000. You require a return of 16 percent and face a marginal tax rate of 30 percent on this project. Calculate the accounting, cash, and financial break-even quantities. THE ACCOUNT AND CASH BALANCES BOTH DO NOT EQUAL 8,000 AS OTHER ANSWERS SUGGEST.

Reference no: EM131926969

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