You have compiled the following information for a proposed expansion project.
Initial investment: $349,000
Fixed costs: $57,700
Variable costs: $112.64 per unit
Selling price: $224.90 per unit
Discount rate: 11 percent
Project life: 3 years
Tax rate: 35 percent

Question

Quizplus · Accepted Answer

Depreciation is straight-line to zero over the project's life.What is the financial break-even point?NPV = $349,000 = EAC(1 - 1/1.11³)/.11EAC = $142,815.36Financial break-even point = [$142,815.36 + $57,700 × (1 - .35)- ($349,000/3)× .35]/[($224.90 - 112.64)× (1 - .35)] = 1,913.19 units

You Have Compiled the Following Information for a Proposed Expansion