Wolfpack, Inc., a textile manufacturing company, is considering opening a produc

Question

Wolfpack, Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $11,230 salvage value after 5 years. Net annual revenue is estimated to be $100,000. Determine the breakeven percentage changes in annual revenue. Use a MARR of 4% per year and a 5-year study period. (HINT: represent your answer as a percentage value, not a decimal value; skip % symbol, but include +/- sign)

Explanation / Answer

Let breakeven revenue = x

NPV =0

-190000 + x*(1-1/1.04^5)/4% +11230/1.04^5=0

x=$40605.79

breakeven percentage changes in annual revenue =($40605.79-100000)/100000= -59.39%

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