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Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production....

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Finance

Consider a project to supply Detroit with 25,000 tons of machinescrews annually for automobile production. You will need an initial$4,500,000 investment in threading equipment to get the projectstarted; the project will last for 5 years. The accountingdepartment estimates that annual fixed costs will be $1,075,000 andthat variable costs should be $200 per ton; accounting willdepreciate the initial fixed asset investment straight-line to zeroover the 5-year project life. It also estimates a salvage value of$450,000 after dismantling costs. The marketing departmentestimates that the automakers will let the contract at a sellingprice of $302 per ton. The engineering department estimates youwill need an initial net working capital investment of $430,000.You require a return of 11 percent and face a tax rate of 22percent on this project. Calculate the accounting, cash, andfinancial break-even quantities.

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Cash Break Even Point BEP Fixed costs Noncash expensesSelling price per unit variable cost per unit Accounting BEPFixed CostSelling price per unit variable cost per unit Financial BEPGross profit cost of sales operating expensesNo of outstanding common shares Proposed quantity of machine screws to be supplied to Detroit 25000 tons Initial investment in threading equipment 4500000 Life of threading equipment 5 years Fixed cost 1075000 Variable cost per ton 200 salvage value    See Answer
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