Dime a Dozen Diamonds makes synthetic diamond by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $180,000. The machinery costs $1.3 million and is depreciated straight-line over 10 years to a salvage value of zerc a. What is the accounting break-even level of sales i terms of number of diamonds sold?
Dime a Dozen Diamonds makes synthetic diamond by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $180,000. The machinery costs $1.3 million and is depreciated straight-line over 10 years to a salvage value of zerc a. What is the accounting break-even level of sales i terms of number of diamonds sold?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $180,000. The machinery costs $1.3 million and is depreciated straight-line over 10 years to a salvage value of zero. a. What is the accounting break-even level of sales in terms of number of diamonds sold? b. What is the NPV break-even level of sales assuming a tax rate of 30%, a 10-year project life, and a discount rate of 12%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Transcribed Image Text:Dime a Dozen Diamonds makes synthetic diamonds
by treating carbon. Each diamond can be sold for
$100. The materials cost for a standard diamond is
$50. The fixed costs incurred each year for factory
upkeep and administrative expenses are $180,000.
The machinery costs $1.3 million and is depreciated
straight-line over 10 years to a salvage value of zero.
a. What is the accounting break-even level of sales in
terms of number of diamonds sold?
b. What is the NPV break-even level of sales
assuming a tax rate of 30%, a 10-year project life,
and a discount rate of 12%? (Do not round
intermediate calculations. Round your answer to the
nearest whole number.)
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