Question

A company is considering a 5-year project that opens a new product line and requires an initial outlay of $85,000. The assumed selling price is $99 per unit, and the variable cost is $60 per unit. Fixed costs not including depreciation are $15,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 12% per year, what is the cash break-even point? (Answer to the nearest whole unit.)

Answer 1

Let cash breakeven point be x
Hence,
x=15000/(99-60)
=>x=384.6153846
or 385 units