# Ayden’s Toys, Inc., just purchased a \$475,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 6-year economic life. Each toy sells for \$19. The variable cost per toy is \$6 and the firm incurs fixed costs of \$335,000 per year. The corporate tax rate for the company is 23 percent. The appropriate discount rate is 11 percent. What is the financial break-even point for the project?

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Ayden’s Toys, Inc., just purchased a \$475,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 6-year economic life. Each toy sells for \$19. The variable cost per toy is \$6 and the firm incurs fixed costs of \$335,000 per year. The corporate tax rate for the company is 23 percent. The appropriate discount rate is 11 percent. What is the financial break-even point for the project?

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Step 1

With the given values, we can calculate the financial break-even point as follows:

Step 2

The formula to calculate straight line depreciation is: Substituting the values, we get the value of depreciation as: Step 3

We can calculate the payments using excel as:  Hence, the payment amount is \$112,278.87

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