Dime a Dozen Diamonds makes synthetic diamonds by processing carbon. Each diamond can be sold for $130.
Question:
Dime a Dozen Diamonds makes synthetic diamonds by processing carbon. Each diamond can be sold for $130. The material cost of a standard diamond is $80. Fixed costs incurred each year for plant maintenance and administrative expenses are $206,000. The machine costs $1.2 million and is depreciated linearly over 10 years to zero salvage value.
A. What is the accounting breakeven level of sales in terms of the number of diamonds sold? (Do not round up intermediate calculations.) Diamonds at par per year
B. What is the NPV breakeven level of diamonds sold per year assuming a 40% tax rate, a 10-year project life, and a 12% discount rate? (Do not round up intermediate calculations. Round your answer to the nearest whole number.) Diamonds at par per year
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus