BEA343 WS4.pdf - 1 A project under consideration costs...

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Microeconomics
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Chapter 2 / Exercise 1
Microeconomics
Arnold
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1.A project under consideration costs $1500 000, has a five year life and has no salvage value. Depreciation is straight-line to zero. The required return is 15 percent and tax rate is 30 per cent. Sales are projected at 1000 units per year. Price per unit is $6 000, variable cost per unit is $3800 and fixed costs are $500 000 per year. Assume no increase in working capital and no additional capital outlays. What are the cash, accounting and financial break-even sales levels for this project? Ignore taxes in answering.
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Microeconomics
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Chapter 2 / Exercise 1
Microeconomics
Arnold
Expert Verified
2.Odion Manufacturer’s Ltd is evaluating a project that costs $280000, has a seven-year life, and no salvage value. Assume that depreciation is prime-cost to zero salvage over the 7-years. Odion requires a return of 10 per cent on suchprojects. The tax rate is 30 per cent. Sales are projected at 60000 units per year. Price per unit is $23.80, variable cost per unit is $10.52 and fixed costs are $100000 per year. a)Calculate the accounting break-even point. What is the degree of

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