The Quorum Company has the following cost information on its new prospective project. Calculate the present value break-even point.
Initial investment: $700
Fixed costs are $300 per year
Variable costs: $3 per unit
Depreciation: $100 per year
Price: $8 per unit
Discount rate: 12%
Project life: 3 years
Tax rate: 34%
A) 80 units per year
B) 95 units per year
C) 139 units per year
D) 144 units per year
E) 152 units per year

Question

Quizplus · Accepted Answer

The present value break-even point is calculated by finding the number of units where the present value of cash inflows equals the present value of cash outflows. Considering the given costs, revenues, and tax implications, 139 units per year is the correct break-even point.

The Quorum Company Has the Following Cost Information on Its