Mazda is considering launching its new electric car. The selling price will be $40,000 per car. The variable costs will be $20,000 per car and fixed costs will be $500,000 per year. The total investment needed to undertake the project is $3,500,000. This amount will be depreciated straight-line to zero over the five-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Toyota has a 20% required return on this new project. Based on market surveys, Toyota projects total sales for the five years at 425 cars or about 85 cars per year.

 Ignoring taxes, should this project be launched?

 How many cars will Mazda need to sell per year to achieve break even on an accounting basis. 

(Please show  the detailed calculation )

Answer rating: 100% (QA)

To determine whether Mazda should launch its new electric car project and the number of cars needed to achieve breakeven on an accounting basis we can ... View the full answer