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29 Sep 2019
Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $217,000. The machinery costs $2.6 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?
b)
What is the NPV break-even level of sales assuming a tax rate of 30%, a 10-year project life, and a discount rate of 10%?
Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $217,000. The machinery costs $2.6 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? |
b)
What is the NPV break-even level of sales assuming a tax rate of 30%, a 10-year project life, and a discount rate of 10%?
Trinidad TremblayLv2
29 Sep 2019