Question: Question 1: Break Even Problem(30 points) A firm initiates a 4 year project with an investment of $50,000. Assume that this initial investment is depreciated

Question 1: Break Even Problem(30 points)

A firm initiates a 4 year project with an investment of $50,000. Assume that this initial investment is depreciated using the straight line method. There is no salvage value at the end of the project. Under this project a certain product is produced and sold. Key financial information is provided below:

Price/unit

10

Direct Expenses/unit

2

SGA (excl. Depreciation)

7,500

Taxes

30%

What is the NI break-even?

What is the NPV break-even? Assume that r = 9%.

Is the NI BE conservative or aggressive compared to the NPV BE? Why? (1-2 sentences)

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