Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $210,000. The machinery costs $1.8 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? (Do not round Intermedlate calculations.) b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 21%, a 10-year project life, and a discount rate of 14%? (Do not round Intermedlate calculations. Round your answer to the nearest whole number.)
Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $210,000. The machinery costs $1.8 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? (Do not round Intermedlate calculations.) b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 21%, a 10-year project life, and a discount rate of 14%? (Do not round Intermedlate calculations. Round your answer to the nearest whole number.)
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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Transcribed Image Text:Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a
standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $210,000. The
machinery costs $1.8 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? (Do not round Intermedlate calculations.)
b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 21%, a 10-year project life, and a discount rate of
14%? (Do not round Intermedlate calculations. Round your answer to the nearest whole number.)
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