Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a synthetic diamond is $80. The fixed costs incurred each year for factory upkeep and administrative expenses are $800,000. The machinery costs $1.12 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? Accounting break-even diamonds b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? Note: Do not round intermediate calculations. Round your final answer to the nearest whole number. NPV break-even level of sales diamonds
Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a synthetic diamond is $80. The fixed costs incurred each year for factory upkeep and administrative expenses are $800,000. The machinery costs $1.12 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? Accounting break-even diamonds b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? Note: Do not round intermediate calculations. Round your final answer to the nearest whole number. NPV break-even level of sales diamonds
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 2E
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