Question: A project under consideration costs $1500 000, has a five-year life and has no salvage value. Depreciation is straight-line to zero. The required return is
A project under consideration costs $1500 000, has a five-year life and has no salvage value. Depreciation is straight-line to zero. The required return is 15 per cent and the tax rate is 30 per cent. Sales are projected at 1000 units per year. Price per unit is $6 000, variable cost per unit is $3800 and fixed costs are $500 000 per year. Assume no increase in working capital and no additional capital outlays. What are the cash, accounting and financial break-even sales levels for this project? Ignore taxes in answering.
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