Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondepreciation fixed costs are $2,000 per year and...

Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondepreciation fixed costs are $2,000 per year and variable costs are $35 per unit.

a.

If the project requires an initial investment of $4,000 and is expected to last for 5 years and the firm pays no taxes. The initial investment will be depreciated straight-line over 5 years to a final value of zero, and the discount rate is 10%. What are the accounting and NPV break-even levels of sales? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Accounting break-even levels of sales

units

NPV break-even levels of sales

units

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b.

What will be the accounting and NPV break-even levels of sales, if the firm's tax rate is 40%? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Accounting break-even levels of sales

units

NPV break-even levels of sales

Answer

Submitted by Asma on Fri, 2012-04-13 14:01

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5	I spent 2 hours on my own on this problem, another 90 min with a TA and a group of 10 people, and then 2 more hours before I got help from Asma. Now that I see it written out, I get it and only wish I got help earlier. It would still be a deal at twice the price!!	jehchr

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Please find attached xxxx xxx xxxxxxx and xxxxxxx solution.

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xxx

xxxxxxxx cost x 50% of sales revenue

xxxxxxxxxx additional profit xxx xx of xxxxxxxxxx xxxxx x xxxxxx

xxxxxxxxxxxx expense = $4,000/5 x $800 xxx year

xxxxxxxxxx xxxxx of sales x

xxxxxx

Fixed costing including xxxxxxxxxxxx	=	$2,000 x $800	= xxxxx xxx year
Additional xxxxxx from each additional dollar xx sales		xxxx

xxx

xxxx xxxxx level corresponds to x production level of xxxxxxxxx per unit = xx xxxxxx

xx xxxx xxx NPV xxxxxxxxxx level xx sales, first xxxxxxxxx xxxx xxxxx

xxxx no xxxxxx Cash flow x (0.50 × xxxxxx − $2,000

x

The xxxx 5-year annuity factor xxx

xxx

xxxxxxxxxx xx xxxxxxx NPV xxxxxx zero:

xxxxxxx flows) − investment x 0

[3.79079 × (0.50 × xxxxxx − xxxxxxx − xxxxxx x x

xxxxxxxxx × xxxxxx − xxxxxxx − xxxxxx - - - more text follows - - -

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Answer

Submitted by Asma on Fri, 2012-04-13 07:38

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Accounting and NPV Break-even level of sales

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xxxxxx check the xxxx and xxx xx know, xx answer xx xxxxx then x will xx for xxxxxxx Thanks

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xxxxxx xxxxxxxxx can produce xxxxxxxxx that xxxx xx xxxx for xxx xxxxx Nondepreciation fixed costs xxx $2,000 xxx year xxx xxxxxxxx xxxxx xxx xxx xxx unit.

a.

If xxx xxxxxxx xxxxxxxx xx initial xxxxxxxxxx of $4,000 and xx xxxxxxxx to last for x years and the firm xxxx no xxxxxx xxx xxxxxxx investment will be depreciated xxxxxxxxxxxxx over 5 years to a final xxxxx of zero, xxx xxx discount rate xx 10%. xxxx xxx the accounting xxx NPV xxxxxxxxxx xxxxxx xx xxxxxx xxx not round intermediate calculations. xxxxx xxxx xxxxxxx to xxx xxxxxxx whole number.)

xxxxxxxxxx break-even xxxxxx of sales

units

NPV xxxxxxxxxx xxxxxx xx xxxxxx

xxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

b.

xxxx xxxx be xxx accounting xxx xxx xxxxxxxxxx xxxxxx of

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Answer

Submitted by shahimermaid on Fri, 2012-04-13 02:03

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xxxxxx Artifacts xxx produce xxxxxxxxx xxxx will xx sold for $70 each. Non depreciation fixed costs are xxxxxx xxx year xxx variable xxxxx xxx xxx xxx unit.

xx

xx xxx xxxxxxx xxxxxxxx xx initial investment xx $4,000 and xx xxxxxxxx xx last xxx x years and the xxxx xxxx no xxxxxx xxx initial investment will xx xxxxxxxxxxx straight-line xxxx x xxxxx to a xxxxx xxxxx of xxxxx xxx xxx xxxxxxxx xxxx is xxxx What xxx the accounting xxx xxx break-even levels of xxxxxx (Do xxx round xxxxxxxxxxxx xxxxxxxxxxxxx Round xxxx xxxxxxx to xxx xxxxxxx xxxxx number.)

xxxxxxxxxxxx

xxxx 0	xxxxx	1
Year1	xxx	0.9091
xxxxx	800	xxxxxx
Year x	800	xxxxxx
Year 4	800	0.6830
Year x	800	xxxxxx

Accounting xxxxxxxxxx xxxxxx of sales

xxx xxxxxxxxxx xxxxx xx sales xx the xxxxx point at

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