You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information:
Sales price per abalone ...... = $35
Variable costs per abalone .... = $6.10
Fixed costs per year ....... = $375,000
Depreciation per year ...... = $120,000
Tax rate ............ = 35%
The discount rate for the company is 15 percent, the initial investment in equipment is $840,000, and the project’s economic life is seven years. Assume 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?

  • CreatedAugust 28, 2014
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