What is the economic break-even level of sales for a project costing $4,000,000 and generating annual cash flows equal to 0.30 × sales − $450,000? Assume the project will last 10 years and require a discount rate of 12%.
A) $2,093,654
B) $2,359,047
C) $3,859,789
D) $13,783,333

Question

Quizplus · Accepted Answer

NPV = 0 = −$4,000,000 + [(0.30 × Sales) − $450,000] {(1 / 0.12) − [1 / 0.12(1.12¹⁰)]}; Sales = $3,859,789

What Is the Economic Break-Even Level of Sales for a Project