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The following table provides cost and unit sales projections for a firm. Find the break-even price assuming a constant price

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Answer #1

Option (B).

For break even, PW of revenue = PW of costs.

60 x P x P/F(12%, 1) + 100 x P x P/F(12%, 2) + 180 x P x P/F(12%, 3) = 1,000 + 400 x P/F(12%, 1) + 600 x P/F(12%, 2) + 700 x P/F(12%, 3)

P x [(60 x 0.8929) + (100 x 0.7972) + (180 x 0.7118)] = 1,000 + (400 x 0.8929) + (600 x 0.7972) + (700 x 0.7118)

P x (53.57 + 79.72 + 128.12) = 1,000 + 357.16 + 478.32 + 498.26

P x 261.41 = 2,333.74

P = $8.93

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