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Unformatted text preview: forecasts is breakeven analysis. Common tool for analyzing the relationship between sales volume and profitability There are two common breakeven measures Accounting breakeven: sales volume at which net income = 0 Financial breakeven: sales volume at which net present value = 0 Stewart Pharmaceuticals NPV $1,188 Net Income (612) Tax (34%) $1,800 EBIT (1,800) Fixed Costs Years 14 Year 0 $1,588$1,600 Cash Flow (400) Depreciation (3,000) Variable Costs $7,000 Revenues Current price = $10/ dose BreakEven Analysis: The project requires an investment of $1,600. In order to cover our cost of capital (break even) the project needs to generate a cash flow each year for four years with a discount rate of 10%. This is the projects breakeven operating cash flow, OCF BE BreakEven Revenue Monte Carlo Simulation Monte Carlo simulation is a further attempt to model realworld uncertainty....
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 Spring '11
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 Finance, Revenue, Net Present Value, Generally Accepted Accounting Principles

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