You have an idea to sell handmade porcelain plates. The only investment needed is a furnace (oven) that you can buy for $40,000. The furnace assumed to last for 8 years and it will be fully depreciated by the straight-line method over its economic life. Other fixed costs amount to $1,000 per year. Taxes are 30 percent. Your discount rate is 15 percent.a. What is the accounting break-even point if each plate costs $4 to make and you can sell plates for $12 apiece?b. Calculate the financial break-even point

The Accounting Break-even Point: The accounting breakeven point is the number of units sold when the…

Answered: You have an idea to sell handmade…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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You have an idea to sell handmade porcelain plates. The only investment needed is a furnace (oven) that you can buy for $40,000. The furnace assumed to last for 8 years and it will be fully depreciated by the straight-line method over its economic life. Other fixed costs amount to $1,000 per year. Taxes are 30 percent. Your discount rate is 15 percent.

a. What is the accounting break-even point if each plate costs $4 to make and you can sell plates for $12 apiece?

b. Calculate the financial break-even point

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