Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The mater cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $214,000. The machinery costs $2.1 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 Intermediate calculations.) Break-even sales diamonds per year b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? (Do not round Intermediate calculations Pound
Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The mater cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $214,000. The machinery costs $2.1 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 Intermediate calculations.) Break-even sales diamonds per year b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? (Do not round Intermediate calculations Pound
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 $60. The fixed costs incurred each year for factory upkeep and administrative expenses
are $214,000. The machinery costs $2.1 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 intermediate
calculations.)
Break-even sales
diamonds per year
b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 35%, a 10-year project life, and a
discount rate of 12% ? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Break-even sales
diamonds per year
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