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 $30. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs $1 million a year 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 sales assuming a tax rate of 35%, a 10-year project life and a discount rate of 12%
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In part a, enter the formula to calculate the break-even point. In part b, enter ...
This problem shows how to calculate the accounting Break Even Point.