You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information:

The discount rate for the company is 15 per cent, the initial investment in equipment is £140,000, and the project’s economic life is 7 years. Assume, for simplicity, that the equipment is depreciated on a straight-line basis over the project’s life.

(a) What is the accounting break-even level for the project?

(b) What is the financial break-even level for the project?

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Sales price per abalone Variable costs per abalone Fixed costs per year Depreciation per year Tax rate 2.00 0.72 340,000 20,000 35%