Given the forecasted data, determine the number of planes that the company must produce in order to break even, on both accounting basis and NPV basis.  The 10-year project initial investment is $1,000 million, each plane sold for $15 million, the variable cost is $7 million each plane, the fixed cost is $150 million, the depreciation uses straight-line method, tax rate is 40% and the company’s cost of capital is 12%.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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Given the forecasted data, determine the number of planes that the company must produce in order to break even, on both accounting basis and NPV basis.  The 10-year project initial investment is $1,000 million, each plane sold for $15 million, the variable cost is $7 million each plane, the fixed cost is $150 million, the depreciation uses straight-line method, tax rate is 40% and the company’s cost of capital is 12%.

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