A company is considering the opportunity to invest into a new 8-year project: manufacturing and selling remote-controlled tree houses. $330,000 would need to be spent upfront to cover the cost of buying the necessary production equipment, which will be depreciating at a constant rate each year over its 8-year economic life. The equipment will be worthless when the project ends.

Additional information regarding the tree houses production:

$3,300 in per-tree-house costs, a.k.a. variable cost of production

$40,000 in total (i.e., not per tree house) annual fixed production costs

Each sold tree house is estimated to bring the company $4,000.

The tax rate of 30% applies to the company's taxable income each year. This project requires a 6% annual rate of return.

Answer the following:

If the company manufactures and sells _________ tree houses each year, then it will break even in the "financial" sense. However, if the cost of buying the necessary production equipment turns out lower, the required annual break-even number of sold tree houses would need to be_________.

Answer rating: 100% (QA)

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