Question: Calculate the accounting as well as the finance break even point
Calculate the accounting as well as the finance break-even point for the following project: initial investment of $500,000, revenues of $700,000, $100,000 fixed costs, $75,000 depreciation, 60% variable costs, and a 35% tax rate. What happens to the break-even if a trade-off is made that increases fixed costs by $30,000 and decreases variable costs to 55% of sales? Assuming the project is going to last 6 years, and opportunity cost of capital is 9%.
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