Purchase Solution

Computation of NPV and Break even point

Not what you're looking for?

Ask Custom Question

A firm is planning to supply a customer with silver coaster sets. The customer plans to purchase 10,000 sets annually for the next 4 years. The coaster sets will sell for $500 per set. Up front costs associated with this project are $600,000 and will have no value at the end of the project. Variable costs are $375 per coaster set and fixed costs are $300,000 per year. The project will require original net working capital of $450,000 that will be fully recovered in year 4. The firm operates with a 13% discount rate and a 36% marginal tax rate. The firm uses straight-line depreciation over the life of the project.

(a) Calculate the firms NPV breakeven points in sales. (please show all work and equations used)

Purchase this Solution

Solution Summary

The following posting contains the computations for breakeven point and net present value of a project.

Solution Preview

See attached file.

sales 5000000 cash outflow 600000 cash inflow
less 450000 discount rate 13%
variable cost 3750000 1050000 present values
contributionf 1250000 1 662000 $0.88 $585,840.87
less ...

Purchase this Solution


Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Introduction to Finance

This quiz test introductory finance topics.