Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $4,800,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,150,000 and that variable costs should be $215 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $525,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $320 per ton. The engineering department estimates you will need an initial net working capital investment of $460,000. You require a return of 14 percent and face a tax rate of 25 percent on this project. Calculate the accounting, cash, and financial break-even quantities.

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Accounting Breakeven quantity 2009523 tons Cash Breakeven quantity 1095238 tons Financial Breakeven ... View the full answer