The economic life of the machine we purchased for $6,000,000 is 5 years, the depreciation method is
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Question:
The economic life of the machine we purchased for $6,000,000 is 5 years, the depreciation method is linear, cost of capital is 20%, and the tax rate is 20%. The project (this machine) will have $0 salvage value after 5 years. We are informed that projected revenues for the next 5 years are $4,200,000 per year, variable costs are 25 percent of the projected revenue, projected fixed costs are $600,000 per year for the next 5 years.
Accordingly, calculate the amount of revenues from a point of accounting and finance break-even analyses.
Investment (Year 0) | Cash Flows in years 1-5 Projected | Accounting Break-Even | Financial Break - Even | ||
Initial Investment | | |
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Revenues |
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Costs | |||||
Variable Costs | |
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Fixed Costs | |
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Depreciation |
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Pretax Profit |
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Tax (20%) |
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Profit After Tax |
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Cash Flow from Operations(CFFO) |
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