Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,350,000 and that variable costs should be $255 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $725,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $368 per ton. The engineering department estimates you will need an initial net working capital investment of $540,000. You require a return of 12 percent and face a tax rate of 23 percent on this project. Calculate the accounting, cash, and financial break-even quantities. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Cash break-even Accounting break-even Financial break-even

Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,600,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,350,000 and that variable costs should be $255 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $725,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $368 per ton. The engineering department estimates you will need an initial net working capital investment of $540,000. You require a return of 12 percent and face a tax rate of 23 percent on this project. Calculate the accounting, cash, and financial break-even quantities. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Cash break-even Accounting break-even Financial break-even

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 1gM

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