Break-even analysis Break-even calculations are most often concerned with the effect of a shortfall in...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Break-even analysis Break-even calculations are most often concerned with the effect of a shortfall in sales, but they could equally well focus on any other component of cash flow. Dog Days is considering a proposal to produce and market a caviar-flavored dog food. It will involve an initial investment of $90,000 that can be depreciated for tax straight-line over 10 years. In each of years 1-10, the project is forecast to produce sales of $100,000, and to incur variable costs of 50% of sales and fixed costs of $30,000. The corporate tax rate is 30%, and the cost of capital is 10%. a. Calculate the NPV and accounting break-even levels of fixed costs. b. Suppose that you are worried that the corporate tax rate will be increased immediately after you commit to the project. Calculate the break-even rate of tax. C. How would a rise in the tax rate affect the accounting break-even point
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
