What is the approximate economic break-even sales for a project costing $4,100,0

Question

What is the approximate economic break-even sales for a project costing $4,100,000 and generating cash flows according to .30 × sales - $460,000? Assume the project will last 8 years and require a discount rate of 10%. (Do not round intermediate calculations.)

A. $2,507,534

B. $2,047,534

C. $4,095,068

D. $13,954,081

What is the approximate economic break-even sales for a project costing $4,100,000 and generating cash flows according to .30 × sales - $460,000? Assume the project will last 8 years and require a discount rate of 10%. (Do not round intermediate calculations.)

Explanation / Answer

Economic BEP :

Initial cost =Present value of Cash flow

4,100,000 = PVAF@10%,8   * CF

4,100,000 = 5.33493 * [.30*Sales -460000]

4,100,000 / 5.,33493 = .30 *sales -460000

   768519.92 = .30*sales -   460000

   .30sales = 768519.92 +460000

   sales = 1228519.92/ .30

      = $ 4,095,066.41   [approx to 4,095,068 ]

correct option is "C"

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