le production. You will need an Initlal $5,900,000 investment In threadıne nt to get the project started; the project will last for 6 years. The accounting nt estimates that annual fixed costs will be $1,425,000 and that varlable cost e $270 per ton; accounting will depreclate the Initilal fixed asset Investmer ne to zero over the 6-year project life. It also estimates a salvage value c O after dismantling costs. The marketing department estimates that th ers will let the contract at a selling price of $386 per ton. The engineerin nt estimates you will need an Initlal net working capltal Investment c
le production. You will need an Initlal $5,900,000 investment In threadıne nt to get the project started; the project will last for 6 years. The accounting nt estimates that annual fixed costs will be $1,425,000 and that varlable cost e $270 per ton; accounting will depreclate the Initilal fixed asset Investmer ne to zero over the 6-year project life. It also estimates a salvage value c O after dismantling costs. The marketing department estimates that th ers will let the contract at a selling price of $386 per ton. The engineerin nt estimates you will need an Initlal net working capltal Investment c
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider a project to supply Detrolt with 26,000 tons of machine screws annually for
automobile production. You will need an Initlal $5,900,000 investment In threading
equipment to get the project started, the project will last for 6 years. The accounting
department estimates that annual fixed costs will be $1,425,000 and that varlable costs
should be $270 per ton, accounting will depreclate the Initlal fixed asset Investment
stralght-line to zero over the 6-year project life. It also estimates a salvage value of
$800,000 after dismantling costs. The marketing department estimates that the
automakers will let the contract at a selling price of $386 per ton. The engineering
department estimates you will need an Initlal net working capltal Investment of
$570,000. You require a return of 9 percent and face a tax rate of 21 percent on this
project
Calculate the accounting, cash, and financlal break-even quantitles. (Do not round
Intermedlate calculatlons end round your answers to the neerest whole number, e.g.,
32.)
Cash break-even
Accounting break-even
Financial break-even
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