Question 7

(Short Answer Question - Chapter 7) Use the following information to answer questions 7 and 8.

Given that you have nearly finished BA 7020, your manager and the Big Box Co. gives you the following information about a prospective 15-year project:

Investment in fixed asset costing $3,600,000, annual fixed costs of $455,200, variable costs per unit of $165.40, a sales price per unit of $312.82, a discount rate of 14 percent, and a tax rate of 21 percent. The asset will be depreciated straight-line to zero over the life of the project.

The

manager asks you to

Compute the accounting break-even sales quantity. If you are willing to invest in projects that generate a positive net income, will you accept the project if you expect to sell 4500 units every year and why?