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Unformatted text preview: the project is 12 percent. What is the project NPV? 1 2 3 4 5 Sales (millions of traps) 0. 5 0. 6 1. 0 1. 0 0. 6 2) Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for the factory upkeep and administrative expenses are $200,000. The machine costs $1 million and is depreciated straightline over 10 years to a salvage value of zero. a. What is the accounting breakeven level of sales in terms of the number of diamonds sold? b. What is the economic breakeven level of sales assuming a tax rate of 35 percent, a 10 year project life, and a discount of 12 percent?...
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This note was uploaded on 02/09/2010 for the course FINA 3001 taught by Professor Molly during the Spring '10 term at University of Minnesota Duluth.
 Spring '10
 molly

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