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You are trying to determine the financial break-even size for the follo

You are trying to determine the financial break-even size for the follo

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You are trying to determine the financial break-even (as we defined in class) marke size for the following project. Your initial investment cost is $150 million, and that investment will depreciate in straight-line form over the 20-year life of the project. There are no new NWC requirements, and there will be no salvage value at the enc the 20 years. The tax rate is 25%. The discount rate is 20%. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this informatic calculate the financial break-even cash flow. Input your answer in millions of dollars rounded to the nearest 0.01 (so if your answer is $5,511,000, answer 5.51). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Pessimistic Expected Optimistic Market Share 4.0% 5.0% 6.0% Price/unit $2350 $2500 $2570 VC/Unit $1900 $1540 $1100 FC $3.5 Million $2 Million $0.5 Million
Transcribed Image Text:You are trying to determine the financial break-even (as we defined in class) marke size for the following project. Your initial investment cost is $150 million, and that investment will depreciate in straight-line form over the 20-year life of the project. There are no new NWC requirements, and there will be no salvage value at the enc the 20 years. The tax rate is 25%. The discount rate is 20%. The possible values for Market Share, Price/Unit, VC/Unit, and Fixed Costs are below. Using this informatic calculate the financial break-even cash flow. Input your answer in millions of dollars rounded to the nearest 0.01 (so if your answer is $5,511,000, answer 5.51). (Do not plug in the assumed break-even CF value from the next question; it will not get you credit here). Pessimistic Expected Optimistic Market Share 4.0% 5.0% 6.0% Price/unit $2350 $2500 $2570 VC/Unit $1900 $1540 $1100 FC $3.5 Million $2 Million $0.5 Million
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