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Fancypants Menswear, Inc is considering launching a new line of chiffon cravats. Over the next 3 years, the firm will produce the cravats for $200...

Fancypants Menswear, Inc is considering launching a new line of chiffon cravats.

Over the next 3 years, the firm will produce the cravats for $200 and sell them for $800 apiece. After 3 years the line will be out of fashion and will be retired.

If they go ahead with the project, the firm will spend $10,000 more on advertising per year and will need to hold an additional $20,000 in inventory over the same period.

 

If the firm's tax rate is 21% and the appropriate discount rate is 10%, what is their break-even sales volume in total number of cravats? (assume the # sold is the same in all three years).


  1. 51
  2. 123
  3. 27
  4. 81
  5. 63

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