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Dime a Dozen Diamonds problem 31 NPV breakeven

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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 $50. The fixed costs incurred each year for factory upkeep and administrative expenses are $213,000. The machinery costs $2.4 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?

Break-even sales =___________________

b. What is the NPV break-even level of sales assuming a tax rate of 40%, a 10-year project life, and a discount rate of 14%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Break-even sales =___________________

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Your tutorial is in excel attached. Please click in cells to see computations. A reference is provided.

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  • MSc, University of Virginia
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