Approximately how much was paid to invest in a project that has an economic break-even level of sales of $5 million,cash flows determined by .1 * sales - $300,000,a 6-year life,and an 8% discount rate?
A) $416,667
B) $924,575
C) $1,016,678
D) $2,311,450

Question

Quizplus · Accepted Answer

The economic break-even level of sales is where cash flows equal zero. At $5 million sales, cash flows are $0.1 * $5,000,000 - $300,000 = $200,000. The present value of these cash flows over 6 years at an 8% discount rate is approximately $924,575.

Approximately How Much Was Paid to Invest in a Project