A 6-year project has an economic break-even level of sales of $5 million and a discount rate of 8%. The annual cash inflows are equal to 10% of sales minus $300,000. What was the initial investment in the project assuming that none of the investment is recoverable when the project ends?
A) $416,667
B) $924,576
C) $1,016,678
D)$2,311,450

Question

Quizplus · Accepted Answer

Investment = [($5m × 0.10) - $300,000]{(1/0.08) - [1/0.08(1.08⁶)]} = $924,576

A 6-Year Project Has an Economic Break-Even Level of Sales