Question: A project has the following estimated data: price = $99 per unit; variable costs = $42.57 per unit; fixed costs = $6,400; required return =

A project has the following estimated data: price = $99 per unit; variable costs = $42.57 per unit; fixed costs = $6,400; required return = 15 percent; initial investment = $6,000; life = seven years. Ignore the effect of taxes and use straight line depreciation to zero.

Required:

(a)

What is the accounting break-even quantity? (Do not round your intermediate calculations.)

(b)

What is the cash break-even quantity? (Do not round your intermediate calculations.)

(c)	What is the financial break-even quantity? (Do not round your intermediate calculations.)
	NOTE: You first need to calculate the Operating Cash Flow that gives an NPV = 0. Don't forget that here we are ignoring taxes (so assume the marginal tax rate is zero).

(d)

What is the degree of operating leverage at the financial break-even level of output? (Do not round your intermediate calculations.)

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