A company planning to market a new model of motor scooter analyses the effect of changes in the selling price of the motor scooter, the number of units that will be sold, the cost of making the motor scooter, the effect on Net Working Capital, and the cost of capital for the project. They predict that the break-even point for sales price for the motor scooter is $2 480. What does this mean?

Question

Quizplus · Accepted Answer

The break-even point is the price at which total costs (both fixed and variable) equal total revenue. At this price, the project neither makes a profit nor incurs a loss, which means the net present value (NPV) of the project would be zero.

A Company Planning to Market a New Model of Motor