Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondeprec
ID: 2623333 • Letter: M
Question
Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $2,600 per year and variable costs are $30 per unit.
If the project requires an initial investment of $5,000 and is expected to last for 5 years and the firm pays no taxes. The initial investment will be depreciated straight-line over 5 years to a final value of zero, and the discount rate is 10%. What are the accounting and NPV break-even levels of sales? (Do not round intermediate calculations. Round your answers to the nearest whole number.)
What will be the accounting and NPV break-even levels of sales, if the firm's tax rate is 40%? (Do not round intermediate calculations. Round your answers to the nearest whole number.)
*PLEASE USE FIGURES FROM PROBLEM, AND SHOW WORK. PLEASE : Do not round intermediate calculations. Round your answer to the nearest whole number and give that as final answer to be selected for best answer. Make sure Answer summation is clear Ty.
Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $2,600 per year and variable costs are $30 per unit.
Explanation / Answer
Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $2,600 per year and variable costs are $30 per unit.
If the project requires an initial investment of $5,000 and is expected to last for 5 years and the firm pays no taxes. The initial investment will be depreciated straight-line over 5 years to a final value of zero, and the discount rate is 10%. What are the accounting and NPV break-even levels of sales? (Do not round intermediate calculations. Round your answers to the nearest whole number.)
Depreciation = 5000/5 = 1000
Accounting break-even levels of sales = fixed cost/(seling price -variable cost)= (2,600+1000)/(60-30)=120
let NPV breakeven sales = x
Oprating cash flows =( x*(60-30)-2600-1000) +1000 = 30x -2600
NPV =0
-5000 + (30x -2600)/1.1+ (30x -2600)/1.1^2 + (30x -2600)/1.1^3 + (30x -2600)/1.1^4 + (30x -2600)/1.1^5 =0
x= 131
What will be the accounting and NPV break-even levels of sales, if the firm's tax rate is 40%? (Do not round intermediate calculations. Round your answers to the nearest whole number.)
Depreciation = 5000/5 = 1000
Accounting break-even levels of sales = fixed cost/(seling price -variable cost)= (2,600+1000)/(60-30)=120
let NPV breakeven sales = x
Oprating cash flows =( x*(60-30)-2600-1000)*(1-40%) +1000 = 18x -1160
NPV =0
-5000 + (18x -1160)/1.1+ (18x -1160)/1.1^2 + (18x -1160)/1.1^3 + (18x -1160)/1.1^4 + (18x -1160)/1.1^5 =0
x= 138
Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $2,600 per year and variable costs are $30 per unit.
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