What is the cash break-even level of output for this project

Assignment Help Financial Management

Reference no: EM13913689

You are considering a new product launch. The project will cost $1,700,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 140 units per year; price per unit will be $22,000, variable cost per unit will be $12,500, and fixed costs will be $490,000 per year. The required return on the project is 10 percent, and the relevant tax rate is 32 percent.

a. Evaluate the sensitivity of your base-case NPV to changes in fixed costs.

b. What is the cash break-even level of output for this project (ignoring taxes)?

c. What is the accounting break-even level of output for this project?

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

Reference no: EM13913689

Questions Cloud

Explain how it will impact that market segment : Second step I have to create a Venn diagram. I have to Mark each segment (three or more) of the market that my product will impact. also, Explain how it will impact that market segment. Elaborate on the depth and breadth of the market idea.

Extensive consumer decision making process : What happens if a consumer purchases a product that does not live up to his expectations following an extensive consumer decision making process?

What type of control chart is used to monitor : What type of control chart is used to monitor the number of defects per unit? a. p-chart b. R-chart

Complete the payroll register for the payroll period : The names of the employees of Hogan Thrift Shop are listed on the following payroll register. Employees are paid weekly. The marital status and the number of allowances claimed are shown on the payroll register, along with each employee's weekly sala..

What is the cash break-even level of output for this project : You are considering a new product launch. The project will cost $1,700,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 140 units per year; price per unit will be $22,000, variable c..

Declaration of two or more directors erifying : Declaration of two or more directors erifying the particulars of all members/partners;

As the accountant for monroe trucking company : As the accountant for Monroe Trucking Company, you are preparing the company's annual return, Form 940 and Schedule A.

Osha''s air contaminant standards : Discuss whether you think OSHA's air contaminant standards are important, and why. Do you think they are adequate to protect employees in the workplace from airborne contaminant hazards? Explain.

What are the best-case and worst-case scenarios : You are considering a new product launch. The project will cost $1,700,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Based on your experience, you think the unit sales, variable cost, and fixed cost pro..

User Account

All Pages