You are trying to determine the financial break-even size for the follo
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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