Question: 1. We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero
1. We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 33 percent. Consider the effect of taxes. We require a return of 10 percent on this project. a. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point? b. Calculate the cash break-even point. c. Calculate the financial break-even point. What is the degree of operating leverage at the financial break-even point
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