Consider the following project: A new product requires an initial investment of $4000 and will be...

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Consider the following project: A new product requires an initial investment of $4000 and will be...

Consider the following project:

A new product requires an initial investment of $4000 and will be depreciated to an expected salvage of zero over 8 years

The price of the new product is expected to be $30, and the variable cost per unit is $10

The fixed cost is $1000，the required return is 12%. What is the Accounting Break-even, what is the cash Break-even and what is the Financial Break even?

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business finance

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Answer 1

Answer #1

Calculate the break even points as follows:

qZQVXNWhQIMAAAAASUVORK5CYII=

Note: For calculating financial break even point, one should calculate the operating cashflows which makes NPV 0.

Formulas:

x8oOLDEAlnfHQAAAABJRU5ErkJggg==

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Answer 2

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