XYZ Co. is evaluating whether to invest in a project with the following information: Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35%   Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation. a. Calculate the cash break-even sales quantity for this project.

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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Q3 7a

7. XYZ Co. is evaluating whether to invest in a project with the following information:

Project cost = $950,000

Project life = five years

Projected number of units sold per year = 10,000

Projected price per unit = $200

Projected variable cost per unit = 150

Fixed costs per year = $150,000

Required rate of return = 15%

Marginal tax rate = 35%

 

Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation.

a. Calculate the cash break-even sales quantity for this project.                           

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