James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 6 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $588,000. The sales price per pair of shoes is $86, while the variable cost is $37. Fixed costs of $286,000 per year are attributed to the machine. The corporate tax rate is 21 percent and the appropriate discount rate is 9 percent. |
What is the financial break-even point? |
financial break-even point is the level of sales at which NPV equals zero
operating cash flow (OCF) each year = income after tax + depreciation
The quantity of units sold is changed, until the NPV is zero. Using this method of trial and error, the quantity of units sold is found to be 9,211 units. At this level of sales, NPV is zero
James, Inc., has purchased a brand new machine to produce its High Flight line of shoes....
James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 5 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $580,000. The sales price per pair of shoes is $85, while the variable cost is $36. Fixed costs of $285,000 per year are attributed to the machine. The corporate tax rate is 25 percent and the appropriate discount rate is...
L.J.’s Toys Inc. just purchased a $510,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its six-year economic life. Each toy sells for $27. The variable cost per toy is $12, and the firm incurs fixed costs of $287,000 each year. The corporate tax rate for the company is 35 percent. The appropriate discount rate is 11 percent. What is the financial break-even point for the project? (Do not round intermediate calculations...
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Ayden’s Toys, Inc., just purchased a $445,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 5-year economic life. Each toy sells for $13. The variable cost per toy is $5 and the firm incurs fixed costs of $305,000 per year. The corporate tax rate for the company is 22 percent. The appropriate discount rate is 10 percent. What is the financial break-even point for the project? (Do not round intermediate calculations...
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