Miller Tools is considering a new project that requires an initial investment of $81,300 for fixed assets,which will be depreciated straight-line to zero over the project's 3-year life.The project is expected to have fixed costs of $37,600 a year,and a contribution margin of $18.40.The tax rate is 34 percent and the discount rate is 15 percent.What is the financial breakeven point?

Question

Quizplus · Accepted Answer

$81,300 = EAC[(1 - 1 / 1.15³)/ 0.15] EAC = $35,607.53 Financial breakeven point = [$35,607.53 + $37,600(1 - 0.34)- ($81,300 / 3)(0.34)] / $18.40(1 - 0.34)= 4,217 units

Miller Tools Is Considering a New Project That Requires an Initial